GDP beats expectations with 0.5% rise in Q4

The dominant services sector, driven by business services and finance, increased by 0.6% compared with the previous quarter, although the longer-term trend continues to show a weakening in services growth.

Production industries grew by 0.6%, boosted by the second consecutive quarter of strong growth in manufacturing.

GDP was estimated to have increased by 1.8% between 2016 and 2017, slightly below the 1.9% growth seen between 2015 and 2016.

Ben Brettell, senior economist at Hargreaves Lansdown, commented: "Good news from the ONS this morning, with UK GDP estimated to have grown 0.5% in the final quarter of last year. Economists had expected a slower pace of expansion of 0.4%. As ever it’s worth noting that this preliminary estimate is produced using less than half the data which will eventually be available, and will be subject to revision in the coming months.

"Yet despite today’s better-than-expected number, the overall picture is one of muddling through. Growth still looks lacklustre – and somewhat unevenly distributed – with the year-on-year figure of 1.5% the weakest since the first quarter of 2013. But it’s certainly fair to say the economy has performed much better than many feared in the aftermath of the Brexit vote, boosted by the rising tide of a global recovery which has lifted all boats. Bank of England governor Mark Carney said in Davos recently that he expects the UK economy to ‘recouple’ with the global economy this year as Brexit negotiations provide greater clarity over our future trading relationship with Europe.

"The Bank’s rate-setting committee will announce its latest decision on 8 February. With growth anaemic, I can’t see any rush to raise rates. Last year’s quarter point move seems like a tacit admission that the cut to 0.25% was unnecessary in the first place, rather than the start of a sustained upwards trend. I’d be somewhat surprised if we saw more than one rate rise this year, probably in the autumn."

Jacob Deppe, head of trading at online trading platform, Infinox, added: “With many of the world’s biggest economies now running at full tilt, the UK’s economic progress looks positively pedestrian. Hardly a surprise given it's the worst annual growth figure for five years.
 
“But in the face of the dire warnings about how Brexit could stop the British economy in its tracks, pedestrian is still an achievement.
 
"With this confirmation that UK Plc made a solid, if unspectacular, end to 2017, the more optimistic are even daring to predict that things could improve in 2018. Whether this year’s growth comes from Britain’s seemingly rediscovered mojo, or simply from the UK riding in the slipstream of a booming global economy, is moot.
 
“Brexiteers will seize on this GDP data as evidence that all is well. Meanwhile, Remainers will speculate wistfully about how much better we’d be doing had Britons not voted to leave the EU.
 
“What neither can say for sure is whether Britain’s slow but steady progress is a sign of continued and genuine strength, or a happy accident.”