March 24, 2017

British economy grows 0.6% in final quarter of 2016

28 January 2017, 12:34 | Ella Tate

U.K. Economy Dismisses Brexit Threat as Growth Beats Forecasts

UK GDP beats forecasts

Private economists believe sustained annual growth rates of 4 percent will be a high hurdle, given underlying trends such as slow growth in the labor market and weak productivity.

The BEA said the GDP deceleration was partly due to a downturn in exports and an increase in imports.

The fourth quarter rise defied economist expectations, with many predicting the United Kingdom slowing retail sales and uncertainty surrounding the Brexit vote would slow growth.

The Commerce Department said the biggest factor contributing to the slowdown at the end of a year ago was the nation's widening trade deficit. It was the worst showing since 2011 and down markedly from 2.6% growth in 2015. "It is widely expected that GDP growth will moderate slightly in the United Kingdom this year, but any forecasts should be taken with a large pinch of salt given all the uncertainties around at the moment". It was the largest trade-related drag on overall growth since the second quarter of 2010.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, noted that the change in foreign trade key subtracted a substantial 1.7 percentage points from GDP growth.

Mnuchin, a former financier at Goldman Sachs, said previous year following his nomination that GDP growth of 4% would be achievable once Congress implemented a series of tax cuts and spending plans put forward by Trump.

- The "real final sales of domestic product" was a relatively weak +0.87%, down over 2% (-2.17%) from the prior quarter.

For all of 2016, the economy grew 1.6 percent.

The Commerce Department issues its first look at economic growth in the October-December quarter at 8:30 a.m.

The data also revealed that U.K. GDP was estimated to have "increased by 2.0 percent during 2016, slowing slightly from 2.2% in 2015 and from 3.1% in 2014".

Gross domestic purchases price index: Increased by 2%. Some forecasters have raised their projections for USA growth this year and in 2018 in anticipation of tax cuts and infrastructure spending.

Government spending grew at a 1.2 percent rate as state and local outlays picked up. Looking ahead in 2017, we expect the core drivers of growth to be similar to 2016's - it's all about consumption while business investment and government spending are significant question marks. Inventories were also a bright spot, contributing 1.0% of the growth. A measure of inflation, which is tied to consumer spending and strips out food and energy costs, climbed at a 1.3 percent annualized pace.

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