As the U.K. economy registered a resilient performance following the Brexit vote, consumers and businesses increased their spending in the third quarter
The Office for National Statistics said that business investment increased 0.9 percent and household spending rose 0.7 percent from the second quarter. With trade providing the strongest contribution, growth overall was unrevised at 0.5 percent., with trade providing the strongest contribution. A separate report from the Confederation of British Industry showed retail sales grew at their fastest annual pace in more than a year in November.
Data and records of the first complete quarter ever since the date that Britons voted to leave the European Union and upended U.K. politics and roiled financial markets are covered in the by ONS report. Growth is expected to slow next year even as there are few signs of any significant effect for now.
Saying uncertainty will lead firms to delay investment while the falling pound squeezes consumers by pushing up the cost of imports, the Office for Budget Responsibility on Wednesday slashed its 2017 forecast to 1.4 percent from 2.2 percent in its twice-yearly review.
“Investment by businesses held up well in the immediate aftermath of the EU referendum, though it’s likely most of these investment decisions were taken before polling day. That, coupled with growing consumer spending fueled by rising household income, and a strong performance in the dominant service industries, kept the economy expanding broadly in line with its historical average,” said ONS statistician Darren Morgan.
Economists, who had widely predicted a decline as the Brexit vote took its toll, were surprised by the jump in business investment.
“In light of Brexit there was a case for uncertainty holding back investment,” said Alan Clarke at Scotiabank in London. “However, things are never black and white. Projects to build planes, ships, buildings etc. will have been signed off 12-18 months ago and that activity won’t shut off overnight.”
While being in line with the average of recent quarters, the increase in consumer spending was down from 0.9 percent growth between April and June.
The CBI said its stores anticipate another gain next month and added that its monthly retail sales index rose to 26 in November — the highest since September 2015.
Economists say that overseas visitors taking advantage of the weak pound could be providing the boost.
By making British exports cheaper and imports more expensive, the exchange rate may also be starting to boost trade. Noting the biggest contribution since the start of the 2014 and the first this year, net trade added 0.7 percentage point to GDP in the three months through September.
Leaving output 0.8 percent higher on the quarter, an index of the dominant services industry rose 0.2 percent in September. declines in industrial production and construction were offset by that.
(Adapted from Bloomberg)
Categories: Economy & Finance