BRITAIN BEATS: The UK economy grew faster than previously thought at the end of 2016

Reuters / Jason Cairnduff

Britain’s economy grew faster than previously thought in the fourth quarter of 2016, according to a second estimate of GDP released by the Office for National Statistics on Wednesday.

According to the ONS’ data, GDP grew by 0.7% in the quarter at the second reading, above the previous reading of 0.6% released in January.

An ONS release said:

“UK gross domestic product (GDP) in volume terms was estimated to have increased by 0.7% between Quarter 3 (July to Sept) 2016 and Quarter 4 (Oct to Dec) 2016, revised up 0.1 percentage points from the preliminary estimate of GDP published on 26 January 2017. Upward revisions (due to later data received) within the manufacturing industries is the main reason (these revisions were first published as part of the Index of Production for December 2016 released on 10 February 2017).”

On a year-to-year basis, growth was actually lower than the first reading with UK GDP 2.o% higher over the course of the last 12 months, compared to a previous estimate of 2.2%

The data was closely watched as Q4 was just the second full quarter of activity after Britain’s historic vote to leave the European Union. Initial predictions of economic doom after the Brexit vote have so far failed to materialise — with the exception of the crashing pound — and economic data has broadly held up well.

UK GDP has now grown in 16 consecutive quarters. The last time UK GDP shrunk over a quarter came in Q4 of 2012 when the economy readjusted to normality following a huge boost from the 2012 Olympic Games in London.

Here is the chart showing GDP growth over the past 13 years:

Office for National Statistics

As with the first reading, the ONS’ data showed that growth in the quarter was once again largely driven by a booming services sector, which grew 0.8% from the previous three months. Services — which accounts for everything from banking to waitressing — is the dominant sector the UK economy, making up roughly 80% of all GDP. Therefore, when it performs strongly, so too does the economy as a whole.

“Overall, the dominant services sector continued to grow steadily, due in part to continued growth in consumer spending, although retail showed some signs of weakness in the last couple of months of 2016, which has continued into January 2017,” the ONS’ head of GDP, Darren Morgan said.

The service sector’s boom helped mask sluggish growth from the production, construction and agriculture sectors, once again.

Sterling slipped a little on the release, falling from roughly flat on the day against the dollar, to a loss of around 0.2%. As of 9.40 a.m. GMT, 10 minutes after the release, it is trading at $1.2444, a fall of 0.21%.