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Britain's GDP growth strong in Q4 2016

LONDON
2017-04-01 04:49

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The official revision of Britain's GDP growth data for the last three months of 2016 showed strong growth of 0.7 percent over the quarter.

The country's economy picked up the pace in the final quarter of 2016 compared to the previous three quarters, according to new data revealed by the Office of National Statistics (ONS) on Friday.

This was an improvement of 0.2 percentage points on 2016 Q3's rate of growth.

Britain's economic growth remains driven by household spending, with private consumption increasing by 0.7 percent over the quarter, the fourth consecutive quarter of such a high-level of growth. The latest data,however, also saw growth in previous quarters revised down slightly, resulting in 2016 annual growth being reduced from 2 percent to 1.9 percent.

Paul Hollingsworth, British economist at Capital Economics, a London-based economic data analysis firm, said: "As expected, quarterly growth in GDP in Q4 was left unrevised at 0.7 percent, although Q3's rate was nudged down from 0.6 percent to 0.5 percent."

"However, with households' real disposable income falling by 0.4 percent on the quarter, the 0.7 percent rise in consumer spending was funded through households running down their saving, with the saving ratio falling to just 3.3 percent, the lowest rate since records began."

Hollingsworth said that the fall in sterling was "clearly boosting inflation", but it also had a beneficial impact, seen in the improvement in the latest current account figures for Q4 2016".

"It (the fall in sterling) is having some offsetting positive impacts through bringing about a long-awaited rebalancing of the economy towards the external sector. The current account deficit narrowed from 25.7 billion pounds to 12.1 billion pounds," said Hollingsworth.

Howard Archer, chief British economist with IHS Markit, said there was a strong positive contribution from net trade to the GDP figures as exports of goods and services jumped 4.6 percent quarter-on-quarter, suggesting that the weakened pound increasingly fed through to lift exports.

"In contrast, imports of goods and services dipped 1 percent quarter-on-quarter, which possibly could have been limited by some import substitution resulting from the weak pound making imports more expensive," said Archer. However, the economist worried that the consequences of Brexit may be dampening business appetite for taking risks.

"Worryingly, business investment contracted 0.9 percent quarter-on-quarter and 0.9 percent year-on-year, suggesting companies were more cautious amid mounting uncertainties facing the economy, notably centered on Brexit."

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