More signs are emerging of a UK economy that continued to grow robustly in the fourth quarter of 2016, with few indications yet of a slowdown caused by the Brexit vote.
An increasing body of evidence suggests that the story of steady growth, in defiance of warnings before the referendum on the effects of a vote to Leave, carried on into the final months of the year. On Wednesday, the National Institute for Economic and Social Research, a think-tank, estimated the economy grew by 0.5 per cent during the fourth quarter, only slightly slower than the 0.6 per cent growth achieved in the second and third quarters.
“Our estimates suggest the economy grew by 2 per cent in 2016, in line with the long run potential growth rate of the UK economy,” said James Warren of Niesr.
Activity in Britain’s factories, chemical plants and oilfields increased faster than expected in November, according to official figures from the Office for National Statistics, also published on Wednesday. Industrial production grew by 2.1 per cent compared with the previous month. Analysts were expecting growth of 1 per cent.
Activities related to crude petroleum and natural gas accounted for just under half the growth in the index, as the Buzzard oilfield — the UK’s largest — was switched back on after temporarily shutting down in October. Activity related to manufacturing pharmaceuticals also grew strongly, by 11.4 per cent, during November, although the ONS warns this can be “highly erratic”.
This means 1.6 percentage points of the 2.1 per cent growth in industrial production in November was due to just two sectors — pharmaceuticals and oil.
The good news was tempered by ONS figures showing that the trade deficit widened in November — although a rally in sterling helped counter some of the rise in the cost of imports from the previous month.
The value of goods imported into the UK exceeded the value of those exported by £4.2bn in November, a widening of £2.6bn from October and a larger deterioration than forecasters had been expecting. There was particularly strong growth in imports of manufactured and semi-manufactured goods.
The first official estimate of growth in the fourth quarter will be published at the end of January.
“The data continue to suggest that momentum in UK activity edged up in quarter four and that consumer-facing services sectors of the economy in particular support that momentum,” said Andrew Benito of Goldman Sachs.
Output in the construction industry, which accounts for 6 per cent of total output, fell by 0.2 per cent in November compared with October, according to figures from the ONS on Wednesday. This was mainly driven by a fall in “non-housing repair and maintenance”.
But construction figures are notoriously volatile. In October, the official data found activity had fallen by 0.9 per cent compared with the previous month.
Wednesday’s figures follow recently released surveys of purchasing managers in construction and manufacturing that pointed to strong growth during the final month of 2016.
The figures will feed into the debate about the strength of the British economy since the referendum on membership of the EU. Most data suggest that increased uncertainty has not led to a slowdown.
“Overall, the generally broad-based better news in November fits better with the survey evidence than the October weakness did,” said Sam Hill, senior UK economist with the Royal Bank of Canada.
However, many economists and investors remain pessimistic about the long-term impact on growth if leaving the EU leads to a reduction in Britain’s ability to trade and threatens its status as Europe’s financial services hub.
On Monday, the pound fell to its lowest level against the dollar since October after comments from Theresa May, the prime minister, were interpreted as ruling out the possibility of continued membership of the single market.
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