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UK growth quickens, putting economy on track for 0.5% Q4 growth

by International Commercial Investment on November 14, 2017

Source: Financial Times

UK economic growth quickened in the most recent three months and the economy is expected to close the year stronger than it started, according to the National Institute of Economic and Social Research.

The influential think-tank’s latest monthly estimate of UK gross domestic product suggested output expanded by 0.5 per cent in the three months to October, ahead of the official first reading for the quarter ended in September of 0.4 per cent.

Real GDP growth for the final quarter of the year is also expected to be 0.5 per cent, NIESR forecast, ahead of economists’ consensus of a 0.3 per cent increase, according to data compiled by Bloomberg.

Economic growth has been lacklustre so far in 2017, as solid growth in the immediate aftermath of the Brexit vote — of 0.6 per cent in the third quarter of 2016 and 0.7 per cent in the fourth — has faded. Quarter-on-quarter growth was just 0.2 per cent in the first three months of the year and 0.3 per cent in the second, according to data from the Office for National Statistics.

“Although economic growth is likely to be stronger in the second half of this year compared with the first, it is important to note that activity has slowed since last year and this at a time when growth in other OECD countries has strengthened,” Amit Kara, head of UK macroeconomic forecasting at NIESR, said.

A shift in UK demand towards international trade in response to stronger global growth and a weaker sterling, and away from struggling domestic demand should help support growth, NIESR said.

“If, as we expect, the economy continues to expand at this pace and inflation remains elevated, there is a case for the Bank of England to gradually raise the policy rate to stop the economy from overheating,” Mr Kara added. “Our latest forecast for the UK is conditioned on a 25 basis points increase in bank rate every six months such that the policy rate reaches 2 per cent in 2021.”

International Commercial InvestmentUK growth quickens, putting economy on track for 0.5% Q4 growth