GDP growth slows in Q4

Output increased in two of the four main industrial groupings within the economy in Q4 2014 - up by 0.8% in services and 1.3% in agriculture. In contrast, output decreased by 1.8% in construction and 0.1% in production.

GDP was 2.7% higher in Q4 2014 compared with the same quarter a year ago. GDP in 2014 as a whole was up 2.6% on 2013.

In Q4 2014 GDP was estimated to have been 3.4% higher than the pre-economic downturn peak of Q1 2008. From the peak in Q1 2008 to the trough in Q2 2009, the economy shrank by 6.0%.

Ian Kernohan, an Economist at Royal London Asset Management, said:

“Based on preliminary estimates of GDP, which can be substantially revised at a later date, growth looks to have slowed a little in the second half of last year, but with the main business surveys still pointing towards economic expansion, there is little cause for alarm. The good news is that interest rates look set to remain on hold until at least the end of 2015.”

Helal Miah, investment research analyst at The Share Centre, comments:

“The first estimates of the Q4 GDP numbers came in slightly below expectations at 0.5% and markedly slower than the previous three quarters of 2014. The primary driver of the reduced growth rate was the construction sector, which saw output fall by 1.8%. However, the slowdown was not enough to prevent the fastest full year growth rate of 2.7% since the financial crisis.

“Despite numbers being slightly weaker than expected, we believe the UK economy remains relatively robust. After a fantastic few years in the construction sector it is quite natural to see a return to normal markets conditions. The services element of the UK economy remains healthy and the full benefits of the plunge in the price of oil are still to come. Low inflation will hold back interest rate rises and we therefore believe that for investors the equity market remains the asset class of choice.”