Daily Management Review

Following the Brexit Vote, the UK Economy is not Showing Signs of a Slowdown


01/26/2017




Following the Brexit Vote, the UK Economy is not Showing Signs of a Slowdown
With a better-than-expected set of growth figures for the fourth quarter, the British economy showed no signs of losing momentum at the end of 2016.
 
Preliminary figures by the Office for National Statistics showed on Thursday morning that the U.K.'s gross domestic product rose 0.6 percent quarter-on-quarter in the three months to December. In the last two sectors, the growth rate was also the same. For the fourth quarter, analysts had been predicting a 0.5 percent rise.
 
In comparison to the consensus of 2.1 percent, the yearly rate also went above expectations, growing at 2.2 percent. ONS stated that down from 2015's 2.2 percent, and 3.1 percent in 2014, growth overall slowed slightly to 2.0 percent in 2016.
 
While last standing around $1.2612 at 10.15 a.m. London time, sterling came under slight pressure following the release of the data even though just before its release, the sterling touched a six-week high against the dollar. While the FTSE 100 rose slightly, the pound hit a three-week high shortly after the new numbers against the euro.
 
According to a statement he released on Twitter, the latest GDP figures highlighted the "fundamental strength and resilience of the U.K. economy", the U.K.'s Finance Minister, Philip Hammond, said. However some uncertainty could lie ahead as the country adjusts to its new relationship with its European counterparts, Hammond did go on to state.
 
"Today's U.K. GDP figures showed that the economy has entered this year in a strong position," Ruth Gregory, U.K. economist for Capital Economics, said in a note. Gregory did go on to add that the balance of growth looked like it was set to shift during 2017 despite growth remaining "remarkably stable" following the Brexit vote.
 
With a 0.8 percent quarter-on-quarter increase, the services sector was seen as a key contributor to the growth figures. Rising 0.7 percent, manufacturing also delivered strong growth numbers. With construction output rising 0.1 percent,  production and construction output remained relatively flat.
 
While investors are expected to watch the U.K. and its data more closely in 2017, especially as the country is expected to trigger Article 50 in the coming months, gthe figures highlighted that growth remained resilient for the two quarters following the Brexit vote.
 
While British Prime Minister Theresa May hoped the U.K. would remain on good terms with its European partners, the country would be seeking a full departure from the EU's single market and she stated that she wanted the country to become :truly global” .
 
2017 will be an interesting year to watch when it comes to U.K. economic data with a "hard Brexit" expected on the horizon.
 
"Despite the economy's recent resilience, growth still looks set to slow in 2017 as higher inflation takes some of the steam out of household spending," Gregory added.
"That said, we don't expect the slowdown to be too severe. For a start, the strong end to last year provides a solid base for growth in 2017. What's more, while the adverse effects of the pound's fall have yet to be fully felt, the same goes for the beneficial effects too."
 
(Source:www.cnbc.com)






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