U.K. Robust Q3 Growth Signals Resilience Post-Brexit
27 October 2016 - 7:12PM
RTTF2
The U.K. economy expanded more-than expected in the third
quarter as robust growth in services offset the contractions in
other sectors, adding strength to the view that the impact of the
'Brexit' vote was less severe than thought earlier.
Gross domestic product climbed 0.5 percent sequentially in third
quarter, preliminary data from the Office for National Statistics
revealed Thursday.
The expansion was faster than the expected growth of 0.3
percent. Nonetheless, the pace of growth eased from 0.7 percent in
the second quarter.
On a yearly basis, GDP advanced 2.3 percent, while economists
had expected the rate to remain stable at 2.1 percent.
This was the first release of GDP covering a full quarter of
data following the 'Brexit' vote in late June.
The ONS said the pattern of growth continues to be broadly
unaffected following the EU referendum with a strong performance in
the services industries offsetting falls in other industrial
groups.
Latest GDP figures confirmed that the immediate economic impact
of the vote to leave the EU has not been nearly as severe as many
had initially expected, Ruth Gregory, a U.K. economist at Capital
Economics, said.
The upbeat figures mean that the chances of a cut in Bank Rate
at next week's MPC meeting have probably fallen to less than 50
percent, the economist added.
Meanwhile, IHS Global Insight economist Howard Archer expects
the economy to suffer in 2017 as the uncertainties facing
businesses and consumers are magnified by the triggering of Article
50.
Further, the fundamentals for consumers are highly likely to
increasingly weaken as their purchasing power is diluted by
markedly rising inflation and muted earnings growth, the economist
said.
On the production side, the dominant services sector grew 0.8
percent. In contrast, output decreased in the other three main
industrial groups.
Construction output fell 1.4 percent and by 0.7 percent in
agriculture. Production shrank 0.4 percent, within which
manufacturing decreased 1 percent.
Another report from the ONS showed that services output gained
0.2 percent in August from July, when it climbed 0.4 percent. The
index of services grew 3.2 percent in August from prior year.
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