Business

Steady as she goes . . . strong consumer spending drives robust 0.6 per cent growth for GDP

The UK's economy grew by 2 per cent last year - better than many western economies

THE UK economy showed no signs of a post-Brexit vote slowdown and ended 2016 with robust growth after strong consumer spending boosted the services sector.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.6 per cent in its initial estimate for the fourth quarter of last year, in line with 0.6 per cent in the second and third quarters.

The increase was driven by a 0.8 per cent rise from the powerhouse services sector between October and December, bolstered by a 1.7 per cent jump from the distribution, hotels and restaurant industry.

Retail sales and travel agencies also underpinned services sector growth over the period, the ONS said.

It means GDP expanded by 2 per cent last year, a slight slowdown from 2.2 per cent in 2015.

But PwC estimates suggest that the Northern Ireland economy may have grown by around 1.4 per cent in 2016, down from 1.6 per cent in 2015 and the lowest growth amongst the 12 UK regions.

Ulster University economist Dr Esmond Birnie said: "These figures tell us that the economy appears to have passed through the Brexit vote with little disturbance in terms of the short-term economic growth rate.

"The construction and production sectors moved back to marginal growth in the fourth quarter after declines in quarter three. The service sector, particularly retail and hotels, was the main driver of the growth at the end of 2016.

"By implication, ONS indicates a 2 per cent growth rate for the UK over 2016 as a whole - not a stellar performance but nevertheless higher than many other major western economies."

He added: "As for Northern Ireland, recent statistics such as the Composite Economic Index and forecasts produced by the Ulster University Economic Policy Centre imply our own regional growth continues to lag behind the UK average.

"To the extent that UK growth continues to be driven by growth in consumption, then next year could be challenging if inflation continues to rise and reduces any growth in real living standards.”

Ulster Bank's northern chief economist Richard Ramsey described the 2016 growth of 2 per cent as "pretty good", but said it had be boosted by population growth and immigration.

He cautions that ongoing issues around Brexit - and inflation - will hit growth this year.

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