Latest posts by Anastasia Moroz (see all)
- HSBC demands answers from Theresa May - 14 Nov 2016
- The impact of Trump victory, according to Deutsche Bank - 09 Nov 2016
- Members of Parliament enabled to block Brexit - 03 Nov 2016
According to a recent preliminary GDP release from the Office for National Statistics, Britain’s economy grew more quickly than expected in the third quarter of 2016.
The data by ONS’ indicated that GDP jumped up 0.5% in the quarter, above the consensus prognosis of economists observing the growth increasing just 0.3%.
On a year-to-year basis, the growth was also higher than predicted, with UK GDP 2.3% higher over the course of the last 12 months, compared to a forecast 2.1%.
The data marked the first activity after Britain’s historic vote to exit from the European Union. Initial prognosis of economic crash following the Brexit vote has so far failed to materialise.
Joe Grice, the ONS Chief Economist, commented: “There is little evidence of a pronounced effect in the immediate aftermath of the vote.”
Growth in the quarter owes greatly to a thriving services sector, which increased 0.6% from the previous three months. Services — which includes everything from banking to waitressing — is the leading sector the UK economy, amounting to 80% of all GDP. Hence, when its performance is strong, so is the economy as a whole.
The service sector’s prosperity makes amends for minute declines in the other 3 pivotal sectors — agriculture, construction and production,. Here is the breakdown from the ONS by sector:
While the results are obviously positive, Samuel Tombs of Pantheon Macroeconomics points out, GDP prognoses often overestimate growth and at the next update the figures might be very easily revised downwards.
Here is what Tombs told clients in a note: “The tendency for revisions to bring initial estimates of GDP growth closer to the rates implied by surveys, and for early official estimates to miss turning points, suggests the preliminary estimate will overstate the economy’s health. Moreover, the economy has yet to experience the adverse impact of the Brexit vote on investment or inflation.”
Concurring Tombs’ statement, Jeremy Cook, the chief economist at international payments firm World First, said in an emailed statement: “We have called the UK consumer a hardy beast in the past and in Q3 the beast was back. The services sector singlehandedly drove growth to a 15th consecutive positive quarter and while the ‘little evidence of a pronounced effect’ from the Brexit vote is being seen yet, we think that it will be as gradually obvious as the year comes to an end. The beast will tire as inflation fires arrows at its increasingly weakening hide.”
Inflation has leaped higher in response to the pound’s steep downfall in recent weeks. Inflation is set to keep increasing as a consequence of the crash, with estimations that 3% or 3.5% inflation could be observed in 2017.