UK economy grew by 0.6% in final quarter of 2017, says thinktank

Economic growth (GDP)
UK economy grew by 0.6% in final quarter of 2017, says thinktank

Longest period of rising manufacturing output in 23 years contributed to fastest growth rate since late 2016, Niesr estimates

Richard Partington and Larry Elliott

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Ford workers in Dagenham, east London
Ford workers in Dagenham, east London. Overall industrial production rose by 0.4% in the latest quarter. Photograph: Carl Court/Getty Images

The longest spell of rising output from Britain’s factories in 23 years has left the economy on course to record its fastest rate of growth since late 2016, one of the country’s leading thinktanks has forecast.

The National Institute of Economic and Social Research said it was pencilling in expansion in gross domestic product of 0.6% in the final quarter of 2017, up from 0.4% in the previous three months and above the latest City estimates.

Amit Kara, Niesr’s head of UK macroeconomic forecasting, said activity had picked up in the second half of last year, following a weak start to the year in which GDP increased by 0.3% in the first two quarters.

“The recovery has been driven by both the manufacturing and the service sectors, supported by the weaker pound and a buoyant global economy, while construction output continues to lag,” Kara said.

“In November, we had forecast final quarter GDP growth at 0.5% and as such, today’s revised estimate suggests that activity has strengthened by more than we had previously anticipated.”

The thinktank believes the stronger than expected performance of the economy, coupled with inflation above the 2% target, will lead to the Bank of England raising interest rates by 0.25 points to 0.75% in May, with further increases every six months until by mid 2021, official borrowing costs have reached 2%.

Data from the Office for National Statistics (ONS) showed UK factories grew their output for an eighth consecutive month in November, a feat last seen in May 1994, with manufacturers helped by a broadly based upswing in the global economy. Manufacturing output was 1.4% higher in the three months to the end of November than in the preceding quarter.

The increase in factory output helped drive growth in overall industrial production, which includes output from mines, quarries, the oil and gas industry, and energy plants, up by 0.4% over the period. A cold snap in November bolstered energy production after warmer weather in October.

Among manufacturers, the fabrication of machinery and equipment provided the largest contribution to growth, with an upturn in renewable energy projects and other big-ticket work.

Ole Black, a senior ONS statistician, said: “There was strong and widespread growth across manufacturing, with notable increases from renewable energy projects, boats, planes and cars for export.”

The improving outlook for industrial production, which accounts for about 14% of GDP, has helped compensate for stuttering consumer spending growth, which has been affected by an increase in the cost of imported goods caused by the depreciation of sterling since the the Brexit vote.

The construction industry is having its toughest period for more than five years, with a 2% contraction in the three months to November marking the sixth successive period of decline. Despite the decrease over the quarter, there was a small upturn in November of 0.4%, compared with the previous month.

The stronger global economy is helping Britain export more goods and services to the rest of the world. Although the UK continues to import more than it exports, as has been the case for several years, the deficit narrowed by £2.1bn in the three months to November, the ONS said.

Black said: “The trade deficit narrowed in the past three months, due mainly to increased exports of services, and shipments of works of art and cars. Over the past year, exports of goods, particularly cars, machinery and crude oil, have continued to increase, and at a faster rate than imports.”

Some economists warned growth in the final three months of 2017 would be lower than Niesr is predicting due to disruption to the Forties oil pipeline last month.

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Topics
  • Economic growth (GDP)
  • Manufacturing sector
  • Manufacturing data
  • Economics
  • Construction industry
  • Thinktanks
  • news
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Nguồn: www.theguardian.com