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Services drive GDP's post-vote surprise growth

By Staff Reporter

Published 28/10/2016

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.5% in its first estimate of third quarter growth, down slightly from 0.7% in the second quarter
The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.5% in its first estimate of third quarter growth, down slightly from 0.7% in the second quarter

The UK economy has bucked expectations of substantial slowdown in the three months after the Brexit vote thanks to a "strong performance" from the powerhouse services sector.

The Office for National Statistics (ONS) said gross domestic product (GDP) grew by 0.5% in its first estimate of third quarter growth, down slightly from 0.7% in the second quarter.

Economists had been pencilling in a steeper fall of 0.3%.

The ONS said there was little evidence of a "pronounced" impact on the economy in the immediate fallout from the EU referendum result.

The higher-than-expected GDP figure was driven by services, which grew by 0.8% between July and September, in part because of a robust performance by the movie industry after the release of Ghostbusters, Jason Bourne, The BFG and Star Trek Beyond in July.

But Northern Ireland's forecast growth for 2017 is still expected to remain behind the UK average - and PwC chief economist John Hawksworth said economic expansion in the province was "unlikely to break 1%" next year.

UK-wide, the main boost to services came from transport, storage and communication, which grew at its fastest pace since the fourth quarter of 2009, rising 2.2% over the period in contrast to 0.6% in the second quarter.

It helped to offset the steepest fall in construction since 2012's third quarter, with the industry dropping 1.4% between July and September after a slide in new housebuilding.

Manufacturing dropped by 1% in the third quarter, while production fell 0.4% and agriculture slipped by 0.7%. Separate figures for the services sector, which accounts for more than 78% of the UK economy, showed that output grew by 0.2% between July and August.

ONS chief economist Joe Grice said the data provided the "most comprehensive picture so far of the post-referendum UK economy", reflecting information from more than 37,000 UK firms.

"While quarterly growth has fallen slightly, the economy has continued to expand at a rate broadly similar to that seen since 2015 and there is little evidence of a pronounced effect in the immediate aftermath of the vote," he said.

"A strong performance in the dominant services industries continued to offset further falls in construction, while manufacturing continued to be broadly flat."

Mr Hawksworth added that the figures suggested the impact of Brexit could be in a "gradual drag" rather than a "short, sharp shock".

Belfast Telegraph

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