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United Kingdom economy strong in 2016 but signs of weakness ahead

The British economy surged in the final months of a year ago, with a revised official estimate upgrading the GDP growth figure for the quarter to the end of December.

However, growth suffered a slowdown in the fourth quarter, with business investment falling by 1.0%, driven by subdued growth within the "ICT equipment and other machinery and equipment" assets.

However, the pound fell after the report, which no longer showed the United Kingdom was the fastest-growing major advanced economy previous year.

Meanwhile business investment decreased by 1.5 per cent between 2015 and 2016, a fall of £2.7bn. This will hit consumer spending. "A slowdown in GDP growth in 2017 therefore now looks inevitable". Hope for growth to continue at a reasonable pace rests on the shoulders of manufacturing, let's hope they are broad enough. Year on year growth was 1.8%.

"But all eyes now turn to the relationship between wages and inflation, and the performance of United Kingdom manufacturing".

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"Overall, the dominant services sector continued to grow steadily, due in part to continued growth in consumer spending, although retail showed some sign of weakness", Darren Morgan, the ONS' head of GDP said. "The latest CBI Industrial Trends survey pointed to the fastest growth rate in manufacturing in two years, while the latest purchasing managers index tracking manufacturing pointed to the fastest rate in output in 30 months".

She pointed to the hint from chancellor Philip Hammond that he has a £27bn fiscal stimulus up his sleeve to help maintain momentum in the economy.

While the figures were boosted by a rebound in trade, business investment fell and slowing household spending growth raised questions about the outlook for 2017.

"Net trade is extremely volatile from quarter-to-quarter - indeed, it subtracted 1.2pp from GDP growth in Q3 - so it is unwise to infer much from one's quarter's growth contribution".

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