Britain's economy beats forecasts with 0.6% growth in the last quarter - as it happened
UK defies downturn fears thanks to another strong performance by service sector firms, but economists fear a slowdown in 2017
- Summary: UK GDP better than expected
- Service sector grows 0.8%, construction and production lag
- Economists predict slowdown this year
- Hammond: UK economy remains resilient
- Listen: Robert Kennedy on GDP's shortcomings
5.48pm GMT
In the US the Dow Jones Industrial Average may have continued to head higher in early trading following Wednesday's long-awaited breach of the 20,000 barrier, but the picture was less clear in Europe.
Some support was given by Johnson & Johnson's $30bn deal to buy Swiss biotech firm Actelion, but some mixed results from the likes of Unilever and Sage (badly received) and Diageo (positive) left markets struggling for direction.
5.17pm GMT
News that Mexico's president Enrique Pena Nieto.has called off a proposed meeting with Donald Trump next week as the two side argue about who should pay for the new US president's infamous wall plan has hit the Mexican currency:
Dollar jumps against the Mexican Peso as it's country's president says he will not go to meeting with President Trump.#USD #MXN #Trump pic.twitter.com/vIUHmZT0k5
4.25pm GMT
The pound continues to be weaker, slipping back from its six week highs.
Despite the better than expected UK GDP figures, concerns about the evenutal outcome of Brexit have helped push sterling down 0.49% against the dollar to $1.2568. Jasper Lawler, senior market analyst at London Capital Group, said:
The unenthusiastic reaction by currency traders [to the UK GDP figures] reflects a sense that this could be as good as it gets for UK growth. So far the only major fallout from the EU referendum has been the drop in the pound which will inevitably feed through to higher prices and act as headwind to consumer spending.
Markets are forward-discounting mechanisms, and while the growth was faster than expected, it's already well-understood the much lamented Brexit slowdown never happened. By that token, it's also evident the Bank of England was completely wrong-footed by the resilience of the UK economy. What's less clear is the extent to which markets will be self-correcting. If the pound recovers under a more neutral outlook for UK rates, the resulting inflation will not be as strong and not such a headwind to growth.
3.21pm GMT
Another set of US data, this time showing a sharp fall in home sales in December after three months of strong gains.
New single family home sales fell by 10.4% to a seasonally adjusted annual rate of 536,000 units last month, a ten month low. November's figure was revised up from 592,000 to 598,000.
3.06pm GMT
The positive US service sector figures come after news earlier this week than manufacturing was also performing well in January, and together they point to further Federal Reserve interest rises, said survey compiler IHS Markit. Chris Williamson, its chief business economist, said:
The improvement in service sector business conditions follows the news earlier in the week that manufacturing also enjoyed a bumper start to the year. The two PMI surveys collectively point to the economy growing at an annualised rate of just over 2.5% in January, and puts the US on a strong footing to achieve faster growth in 2017. IHS Markit currently forecasts that the US economy will grow by 2.3% in 2017, up from 1.6% in 2016.
Although the strong dollar is hitting exports, domestic demand clearly remains buoyant. Companies reported one of the highest inflows of new business for a year and a half as demand lifted higher at the start of 2017.
Job creation also remained encouragingly solid, and especially impressive given current high overall levels of employment in the economy.
2.57pm GMT
The US services sector has performed slightly better than expected in January, according to initial estimates.
Markit's flash service sector PMI came in at 55.1, up from 53.9 in December and higher than the forecast figure of 54.4. The composite index - which includes services and manufacturing - was 55.4, up from 54.1 in December.
2.40pm GMT
After Wednesday's record breaking run for the Dow Jones Industrial Average, which surged through the 20,000 barrier for the first time, US markets have opened the new trading day on a positive note.
The Dow is up 21 points at 20,089 , while both the S&P 500 and Nasdaq Composite have hit new highs, albeit with marginal percentage gains so far.
1.42pm GMT
Just in: More Americans than expected signed on for jobless benefits last week.
The closely watched Initial Claims figure rose to 259,000 in the seven days to January 21st (the day after Donald Trump's inauguration), from 237,000 the previous week.
1.39pm GMT
Over in America, construction and equipment giant Caterpillar has surprised Wall Street by posting a 13% drop in sales in the last three months.
1.36pm GMT
Time for a recap, with links to the key points in the blog
1.04pm GMT
The pound has fallen back from this morning's six-week highs, and is now trading around $1.256, a fall of 0.5%.
This morning's decent growth figures should have supported sterling, but instead traders are worrying about Brexit again.
This morning's UK GDP figures surprised to the upside, yet the pound failed to respond positively to the news as it suffered in a typical "buy the rumour, sell the fact" type of a reaction, except that there were no rumours per se. Sterling has been appreciating noticeably in recent days as traders continued to unwind their Brexit trades - until today.
The economic outlook for the UK remains bleak even if the Brexit vote itself hasn't had any material impact on the economy yet. The pound would do very well to get back to $1.40s again. The full impact of Brexit will not be felt for months - or even years - but the uncertainty will most likely prevent sterling from appreciating significantly in the interim. So get used to seeing see more chop and churn in GBP for the foreseeable future.
12.48pm GMT
Personal finance experts are urging families to get ready for a financial squeeze in 2017, as higher inflation eats into household incomes.
Hannah Maundrell, editor in chief of money.co.uk says:
"It's a real relief to see the economy has proved resilient against the Brexit backdrop, this puts us in a solid position to navigate the uncertain year ahead. Households haven't been scared out of spending by doom and gloom projections of life outside of the EU and this has really helped to push growth forward.
"My biggest concern right now is how households will cope with rising costs over the coming year. Already two thirds of working households say they're just about managing to make their money stretch and with few having enough savings to back them up, lots of people will feel the pinch. There's a real risk this could impact growth.
The cheaper pound may be bad news for those queuing at the checkout, as rising import costs push up prices, but it provides new opportunities for UK exporters and a boost for the UK tourism industry. We mustn't let the UK's strong economic output mask the issues facing Brits up and down the country.
Consumers are already battling rising food, transport and energy costs, and with an interest rate rise also possible in 2017, households will find little comfort in the macro-economic picture.
12.26pm GMT
Chancellor Philip Hammond has told City reporters not to expect a thrilling budget in March:
Chx presents steady as she goes picture of econ - suggests March budget won't be exciting. "Budgets are not meant to be exciting", he says. pic.twitter.com/BJKn6FvDlJ
12.22pm GMT
If the Remain Campaign's warnings had been accurate, this is the day that Britain would have officially entered recession.
But rather than two quarters of contraction, today's figures show the economy actually grew by 1.2% in the last six months after the EU referendum.
A better explanation for the robust performance of the economy is that consumers have carried on spending. The factors that underpinned domestic demand ahead of the referendum - low unemployment, rising house prices and rock-bottom interest rates - are still in place. The Bank's decision to cut rates and to deliver another dollop of quantitative easing in August has, if anything, created even more growth-friendly conditions.
Related: UK GDP growth shows consumers spending despite Brexit worries | Larry Elliott
11.21am GMT
Joanna Partridge of ITV News flags up that Britain probably outperformed its major rivals last year.
#GDP data shows us economy grew 2.2% year-on-year. Annual figure means UK economy had fastest growth in G7 (if others hit their forecasts)
11.01am GMT
Brexit uncertainty is likely to dampen growth this year, according to several City experts, despite the resilient growth in the last three months of 2016.
Here's Andrew Sentance, senior economic adviser at PwC:
"Strong consumer spending has supported growth over the past three months and this has more than offset the dampening impact of Brexit uncertainty in investment. As a result, the services sector has continued to be the driving force for the UK economy in recent quarters. The world economy has also helped economic growth with positive indicators in all the main economic regions - Europe, North America and Asia.
"2017 will be a more testing year for the UK economy as consumer spending will be squeezed by rising inflation. Despite this, we should expect the underlying resilience of the UK economy and healthy global growth to support economic activity in the year ahead. That should enable GDP to grow by close to 1.5% in 2017 even though Brexit uncertainties will have a dampening effect."
"Far from plunging into recession after the vote to leave the EU, the UK was actually the fastest growing G7 economy in 2016. GDP grew by 0.6% quarter on quarter in the final three months of 2016, faster than expected. This included strong contributions from consumer-focused activities, business services and finance.
"Looking ahead to 2017, the major question is whether a squeeze on real household incomes, and the impact of Brexit uncertainty on the corporate sector, will be offset by the benefits of cheaper sterling against a stronger backdrop of global economic growth."
"Challenges abound for forecasters in 2017, but we'd caution against complacency.
Consumers won't be ramping up spending thanks to rising inflation and sluggish wage growth, and businesses' appetite to sign off big investments will depend on how they view the progress of Brexit negotiations. There's every chance that this rate of expansion is the high point for the next couple of years
UK GDP continues to levitate due to households borrowing in order to spend impending pay cut as fast as possible. https://t.co/Hfwt60eAxI
10.39am GMT
Several people are pointing out that there's no sign that Britain's vote to leave the EU has hurt the economy (yet anyway).
This is from Alan Clarke of Scotia Bank:
The first 6 months since the Brexit vote have seen growth of almost 2.5% annualised, which is above trend. Clearly, life goes on, despite the Brexit vote.
There isn't an awful lot of detail in the breakdown at this stage. But what we do have shows that services output continues to do all the heavy lifting, while construction output remains the problem child of the UK economy.
Hate to bang on about it, but still no sign of that Brexit recession.....https://t.co/iohCvSsUJR
Looks like the Brexit Referendum outcome & the following monetary stimulus has given the economy a solid boost in H2 of last year
UK GDP up by 0.6% during Q4 (Oct to Dec) 2016, same rate of growth as in previous 2 quarters -- Brexit vote no discernible effect on growth
"The latest retail sales data shows a slowdown in spending, and inflation is only just beginning to bite. Businesses now also have a clearer picture of the path of Brexit, so investment behaviour is likely to change in 2017.
"This all adds up to a potential slowdown in the economy this year - the Bank of England's gloom about the economic consequences of Brexit could well prove justified in the end, despite the cheery tone of this morning's data."
10.29am GMT
Matt Whittaker of Resolution Foundation is tweeting some interesting GDP charts.
This shows how the recovery since the 2008 crash has been much slower than earlier recessions, on a GDP-per-capita basis (growth divided by population).
Positive end to 2016 for GDP, but annualised GDP per capita just 1.3% up. And still less than 2% higher than at start of 2008 downturn pic.twitter.com/s1E0SErwjq
Growth in GDP per capita briefly returned to pre-crisis trend in 2014, but has fallen back since. Hasn't been above trend for 41 quarters pic.twitter.com/iq71UYRkku
But the UK continues to do better than many other countries (on overall GDP at least) pic.twitter.com/uw5dkQIDp7
10.23am GMT
Here's a recording of Bobby Kennedy's famous speech on the problems with GDP, from 1968.
10.12am GMT
TUC General Secretary Frances O'Grady is worried that workers will suffer in 2017, if wages don't keep pace with inflation:
"Our economy may have been resilient in the face of the Brexit vote, but GDP growth is stuck in the slow lane. And people are still feeling the financial crisis in their pockets.
"This isn't a time for government complacency. 2017 will be a challenging year, so ministers can't let us sleep walk into another living standards crisis.
10.10am GMT
The 0.7% jump in manufacturing output last quarter is mainly due to a large rise in the erratically performing pharmaceuticals industry.
10.00am GMT
Economist Rupert Seggins flags up that Britain's service sector has been dominant for decades now:
Whatever is written about the UK recovery being imbalanced, bear in mind it's been this way since the 1990s. pic.twitter.com/SiTlhlKzPN
Most recent independent UK economy forecasts are for growth to slow in 2017. But there's still a wide range of opinions. pic.twitter.com/1NFc8QWiFR
9.55am GMT
Chancellor Philip Hammond has welcomed today's growth figures, but warned that the economy still faces uncertainty.
He says:
"Every major sector of the economy grew last year, which is further evidence of the fundamental strength and resilience of the UK economy. There may be uncertainty ahead as we adjust to a new relationship with Europe, but we are ready to seize the opportunities to create a competitive economy that works for all."
We're delighted to welcome @PHammondMP to our offices today for the announcement of UK's quarterly #GDP figures. @hmtreasury pic.twitter.com/n8o4IRXZTa
9.51am GMT
Digging into the GDP report, we can see that Britain's retail sector was fastest growing part of the economy.
That's a worry, as it suggests the UK is still reliant on consumer spending (often on imports) rather than a strong manufacturing base.
UK Q4 growth all down to services.
"Production, construction and agriculture each contributed 0.00 %age points to the headline figure" @ONS
9.45am GMT
Darren Morgan, the head of GDP at the ONS, says Britain's economy ended last year with "steady growth".
"Strong consumer spending supported the expansion of the dominant services sector and although manufacturing bounced back from a weaker third quarter, both it and construction remained broadly unchanged over the year as a whole."
9.41am GMT
Britain's economy has now enjoyed four years of uninterrupted growth.
It is now 8.7% higher than its pre-crisis peak in 2008. But on a per capita basis (adjusted for population changes), it's only 1.9% larger.
9.37am GMT
Britain's manufacturing sector grew by 0.7% during the last quarter, nearly as fast as the services sector.
Breaking: UK economy grows faster than forecast, with GDP rising by 0.6% in Q4 2016 with growth dominated by services sector. pic.twitter.com/pl1HvyQRrn
9.36am GMT
Britain's service sector drove growth in the last quarter, expanding by 0.8%, while construction and industrial output lagged behind (again).
Here's the key points from today's GDP report:
9.34am GMT
On an annual basis, the UK economy grew by 2.2% in the last quarter - stronger than the 2.1% growth expected.
9.30am GMT
Breaking: Britain's economy expanded by 0.6% in the final three months of 2016.
That's stronger than the 0.5% expected by City economists.
9.25am GMT
Five minutes to go!
UK GDP is due at 9:30am so get ready to Stand By Your Desks! #BoE #GBP
9.22am GMT
Economists have already warned that the UK economy will slow in 2017, even if last year ended on a high note.
The fall in the pound will drive up inflation thus year, eating into household disposable income and ultimately meaning slower growth, according to some City experts.
Related: UK GDP preview: sharp slowdown expected in 2017
9.16am GMT
Over in the City, drinks giant Diageo said it had benefited from the slide in the pound against the US dollar and the euro since the Brexit vote.
8.58am GMT
We shouldn't forge that GDP is a somewhat flawed measure - notable for what it omits, as well as what it includes.
GDP is calculated by adding up all the money spent and earned in an economy, and the value of the goods and services produced. That gives a measure of the size of the economy, which you can divide by the population total to get GDP per capita.
It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl.
It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman's rifle and Speck's knife, and the television programs which glorify violence in order to sell toys to our children.
Related: Bobby Kennedy on GDP: 'measures everything except that which is worthwhile'
8.35am GMT
Britain's service sector makes up almost 80% of the economy; this chart from Bloomberg shows how it has provided most of the growth in the last three years:
There's lopsided and then there's the UK economy. More of the same in today's GDP data? https://t.co/yv6iuWWvSo pic.twitter.com/JOLDFwBmdN
8.29am GMT
Sterling has hit a new six-week high, as traders await the UK GDP figures in an hour's time.
One pound is now worth $1.266, its highest level since 14 December.
Further on, the pound will be in focus again today with UK Q4 GDP at 09:30 where consensus is 0.5% growth q/q and 2.1% y/y.
8.24am GMT
The Treasury have published a guide to GDP:
At 9:30am the @ONS will release the latest #GDP stats - click to find out what #GDP is and why it matters: https://t.co/EJvB2nd7mk pic.twitter.com/jnHKq3oHP7
Rising GDP means the economy is growing, and the resources available to people in the country - goods and services, wages and profits - are increasing.
8.18am GMT
Analysts at RBC Capital Markets predict that the UK economy ended 2016 in solid shape, after a wobble in October.
News on economic output was very weak for October (the service sector aside) but the November story saw a reversal for the production sector at least.
Together with strong survey evidence for December that prompted us recently to revise up our Q4 GDP growth forecast to 0.5% q/q as a robust contribution from the service sector is expected once again.
8.16am GMT
Today's GDP figures may show if the prospect of a 'hard Brexit' has hurt the economy.
The fourth quarter of 2016 began with prime minister Theresa May pledging to trigger Article 50 by the end of March 2017, and making immigration control a top priority.
We should remember that the prospect of a 'Hard Brexit' only raised its head in October, so there could be an even larger decline in business investment in the final three months of the year
Although this may have no bearing on growth right now, it is likely to impact GDP levels and confidence levels at some point in 2017, so a sharp decline in this figure is worth noting.
7.38am GMT
Good morning.
It's time for another healthcheck on the UK economy, as we press on towards triggering Article 50 and leaving the EU.
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