‘The near-term momentum in GDP likely will not compel the Monetary Policy Committee to abandon its view that the economy will slow this year as a result of the Brexit vote’. – Samuel Tombs, Pantheon Macroeconomics
The British economy ignored the widely expected post-Brexit vote slowdown once again in the three month period to December, maintaining the third quarter’s growth pace. According to a preliminary GDP estimate released by the Office for National Statistics on Thursday, the UK economy expanded at a quarterly pace of 0.6% in the Q4, unchanged from the Q3. Meanwhile, market analysts anticipated a 0.5% growth rate. In a report, the ONS said economic growth was mainly boosted by services that offset weaknesses in the construction and industrial sectors. The majority of economists expected the British economy to face a severe slowdown after the June 23 referendum. However, the ONS reported the annual growth rate of GDP fell 2.0% in 2016 from 2.2% in the previous year. Moreover, this decrease was mainly due to weak growth registered in the Q1 of 2016. Nevertheless, the economic outlook for 2017 looks darker, as the post-Brexit impacts are likely to become more significant.
Furthermore, the weak Pound is expected to weigh on wages and consumer spending, which is the dominant source of economic growth in the UK. According to the latest forecasts released by the Bank of England, the economy is set to grow 1.4% in 2017. However, this forecast, like all economic forecasts, is subject to change.