UK Growth Unrevised at 0.5%

A new survey suggests Britain’s economic optimism is holding steady in the wake of the Brexit vote.

Figures from the Office for National Statistics show consumers and businesses increased their spending in the third quarter by 0.7 and 0.9% respectively, Euronews reported.

Growth overall was unrevised at 0.5%, with trade providing the strongest contribution. The report covers the first full quarter of GDP since the country sent shockwaves through financial markets by voting to leave the European Union.

On the year, growth was confirmed at 2.3%, in line with expectations and earlier estimates. Despite a 1% drop in Q2, exports were up 0.7% in the third quarter, while imports fell 1.5% despite a 1.3% jump in Q2.

Darren Morgan, an ONS statistician, said: “Investment by businesses held up well in the immediate aftermath of the EU referendum, though it is likely most of those investment decisions were taken before polling day.”

“That, coupled with growing consumer spending fuelled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historic average.”

Jonathan Chitty, investment analyst at Brown Shipley, said: “Today’s GDP figures give no surprises, remaining in-line with the preliminary estimate. The 0.5% growth in output seen over the third quarter was entirely driven by the services sector, which makes up around 80% of UK economic activity, while all other areas of the economy declined over the period.

“Output is now 2.3% higher than a year ago—some commentators will see this as evidence Brexit fears were overdone. However, we are still some way off understanding the full impacts of Brexit and the OBR’s GDP forecasts released this week show falling output may well be on the horizon.”

Ruth Gregory, UK economist at Capital Economics, added: “The actual triggering of Article 50 next year could prompt further falls in business sentiment and investment.

“Moreover, the adverse impact of the pound’s fall—in the form of the upward impact on inflation and corresponding squeeze on real incomes—has not yet been felt. But we suspect that importers and retailers will absorb some of the increase in imported costs, ensuring that the squeeze on household incomes is not too intense.

“And with ultra-accommodative monetary policy continuing to support spending and discourage saving, we don’t think a sharp slowdown in spending is on the cards.

“So although we expect a bit of a slowdown from Q3’s rate in the quarters ahead, we still think growth will beat expectations and forecast GDP to grow by 1.5% next year.”