UK GDP holds up in contrast with Hammond’s gloom

Added 25th November 2016

United Kingdom annualised GDP growth was reported to have held at provisional estimate of 2.3% in the third quarter of 2016 despite the Brexit vote.

UK GDP holds up in contrast with Hammond’s gloom

Two days removed from the Autumn Statement in which Chancellor Philip Hammond revised GDP forecasts down on the advice of the OBR, the ONS reported that an economic downturn has shown no signs of materialising.

“Today’s GDP figures give no surprises, remaining in-line with the preliminary estimate,” said Jonathan Chitty, investment analyst at Brown Shipley. “The 0.5% growth in output seen over the third quarter was entirely driven by the services sector, which makes up around 80% of UK economic activity, while all other areas of the economy declined over the period.”

“Output is now 2.3% higher than a year ago - some commentators will see this as evidence Brexit fears were overdone,” added Chitty. “However, we are still some way off understanding the full impacts of Brexit and the OBR’s GDP forecasts released this week show falling output may well be on the horizon.”

“That negative revisions were avoided was enough for sterling to recapture this week’s gains but the eye-catcher was the rise in business investment to 0.9% on the quarter, further banishment of Britain’s doomsayers,” noted Richard de Meo, managing director of Foenix Partners. “Recent sterling strength is acknowledgement that the dark clouds of looming Brexit negotiations are advancing less ominously now and, in surveying the landscape of UK cyclical data, the immediate economic surroundings offer more than a few pockets of optimism.”

Separately, it was revealed that retail sales have picked up with volumes growing at the fastest pace for over a year in the 12 months to November, according to the  CBI’s quarterly Distributive Trades Survey.

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Alex Sebastian

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Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.

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