Strong consumer spending drives robust 0.6% growth for GDP

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

The increase was driven by a 0.8% rise from the services sector between October and December, bolstered by a 1.7% 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% last year, a slight slowdown from 2.2% in 2015.

Darren Morgan, head of GDP at the ONS, said data showed the economy ended 2016 with “steady growth” for the third consecutive quarter.

“Strong consumer spending supported the expansion of the dominant services sector and, although manufacturing bounced back from a weak third quarter, both it and construction remained broadly unchanged over the year as a whole.”

Manufacturing rose 0.7% thanks to a rebound from the pharmaceutical industry, but industrial production came in flat after a 6.9% slump from mining and quarrying.

The construction industry bounced back to grow 0.1% after slumping 0.8% in the third quarter.

Agriculture also swung back into positive territory after declining for three quarters on the bounce, expanding by 0.4% in the three months to the end of the year.

It comes as separate figures for the index of services showed output climbed 0.3% between October and November, marking six consecutive months of growth.

GDP’s fourth-quarter rise was above economist expectations of 0.5%, with many predicting the UK economy would be pegged back by slowing retail sales and uncertainty surrounding the Brexit vote.

Previously released data showed retail sales in December fell at their fastest rate in nearly five years, as shoppers spent less on clothing, footwear and household goods.

Danske Bank economist Conor Lambe said: “

“All in all, the UK economy performed relatively well in 2016 with annual growth estimated at 2.0%. However, UK GDP is likely to grow at a slower rate in the year ahead as uncertainty acts as a drag on investment and an expected increase in inflation squeezes consumer’s purchasing power.”