Customer Behaviour

The UK economy defied expectations of a Brexit-induced slowdown and capped off 2016 with robust growth after strong consumer spending boosted Britain’s services sector.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.6 per cent in its initial estimate for the fourth quarter of last year, in line with growth of 0.6 per cent in the second and third quarters.

The upward impact was driven by a 0.8 per cent rise from Britain’s powerhouse services sector between October and December, which was bolstered by a 1.7 per cent expansion from the distribution, hotels and restaurant industry.

Retail sales and travel agencies also underpinned services sector growth over the period, the ONS said.

The UK’s construction industry expanded marginally by 0.1 per cent for the three months to the end of last year, while agriculture lifted by 0.4 per cent and industrial production was flat.

It means GDP expanded by 2 per cent last year compared with 2015.

Darren Morgan, head of GDP at the ONS, said data showed the economy ended 2016 with “steady growth” for the third consecutive quarter.

“Strong consumer spending supported the expansion of the dominant services sector and, although manufacturing bounced back from a weak third quarter, both it and construction remained broadly unchanged over the year as a whole.”

It comes as separate figures for the index of services showed output climbed by 0.3 per cent between October and November last year, marking six consecutive months of growth.

The rise in GDP for the fourth quarter came in above economist expectations’of 0.5 per cent, with many predicting the UK economy would be pegged back in the fourth quarter by slowing retail sales and uncertainty surrounding the Brexit vote.

Previously released data showed retail sales in December fell at their fastest rate in nearly five years, as shoppers spent less on clothing, footwear and household goods.

Chancellor Philip Hammond said the fourth-quarter update underscored the resilience of the UK economy since the Brexit vote.

“Every major sector of the economy grew last year, which is further evidence of the fundamental strength and resilience of the UK economy.

“There may be uncertainty ahead as we adjust to a new relationship with Europe, but we are ready to seize the opportunities to create a competitive economy that works for all.”

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