U.K. Q4 GDP Growth Slows; 2014 Expansion Strongest In 7 Years
27 January 2015 - 11:05PM
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U.K. economic growth slowed more than expected in the fourth
quarter due to weakness in the production and construction sectors
but the economy logged its strongest growth in seven years in 2014
as a whole, preliminary data from the Office for National
Statistics showed Tuesday.
Gross domestic product grew 0.5 percent sequentially, slower
than the 0.7 percent expansion seen in the third quarter and a 0.6
percent rise forecast by economists. This was the slowest growth in
a year but marked the eighth straight quarter of expansion.
The preliminary estimate is based only on the output side of the
economy and excludes expenditure-side breakdown of GDP. At this
stage, data content is less than half of the total required for the
final output estimate, the ONS said.
Output decreased 1.8 percent in construction and by 0.1 percent
in production. Meanwhile, production of the dominant service sector
increased by 0.8 percent. Agricultural output was up 1.3
percent.
IHS Global Insight Chief UK Economist Howard Archer said it is
worth noting that on the expenditure side, consumer spending was
likely strong in the fourth quarter given the overall strength of
retail sales.
Nonetheless, Archer said there is the very real risk that growth
could take a significant hit in 2015 from heightened political
uncertainty in the run-up to May's general election weighing down
on business confidence and investment.
GDP grew 2.7 percent in the fourth quarter compared with the
same quarter a year ago, which was slightly slower than the
expected growth of 2.8 percent but faster than the third quarter's
2.6 percent expansion.
For 2014 as a whole, GDP was up 2.6 percent, the strongest
growth since 2007. Chancellor of the Exchequer George Osborne said
today "the recovery is on track."
Samuel Tombs, a senior UK economist at Capital Economics said
GDP growth could pick up to 3 percent this year, with the recent
halving of oil prices providing a timely boost to households'
discretionary spending power, credit still becoming cheaper and pay
growth on an improving trend.
Earlier this month, the E&Y ITEM Club raised its UK GDP
growth forecast for this year to 2.9 percent from 2.4 percent
previously.
The International Monetary Fund estimates the U.K. GDP to expand
2.7 percent in 2015 and 2.4 percent in 2016.
According to the ONS data, fourth quarter GDP climbed 3.4
percent from the pre-economic downturn peak of the first quarter of
2008. From the peak in the first quarter of 2008 to the trough in
the second quarter of 2009, the economy shrank 6 percent.
In a separate report, the ONS said the index of services grew
3.2 percent in November from last year. On a monthly basis,
services output edged up 0.1 percent in November.