Belfast Telegraph

Robust growth in manufacturing and construction industries during December

Britain's economy has continued to defy expectations of a Brexit-induced slump after the manufacturing and construction industries capped off 2016 with robust growth.

Figures from the Office for National Statistics (ONS) showed construction output beat expectations to rise by 1.8% in December, up from a revised 0.4% in November.

Manufacturing output also grew more quickly than economists had predicted by lifting 2.1% in December, while official data revealed Britain's trade gap narrowed in the final month of last year.

The goods and services deficit - the gap between exports and imports - shrunk by £300 million to £3.3 billion in December after the export of goods to non-EU countries rose by £1.1 billion.

Kate Davies, ONS senior statistician, said a pick-up in the exports of oil and aircraft had helped the trade gap decrease by £5.6 billion to £8.6 billion between the third and fourth quarter of 2016.

However, she said there was "little evidence" to suggest the collapse in the value of sterling since the Brexit vote had made an impact on the trade balance.

She added: "Industrial output and the construction sector both remained broadly flat over the final quarter of 2016 but grew in December, with manufacturing growth driven by a strong month for often volatile pharmaceuticals and the expansion in construction led by house and commercial building."

The manufacturing industry's strong performance drove a rise in industrial production output, which grew by 1.1% in December despite economists' pencilling in a more modest 0.1% expansion.

It means total production output rose by 1.2% in 2016 compared with the year before, with manufacturing growing by 0.7% over the period.

Sterling's growth slipped back in response to the slew of economic data to trade marginally up against the US dollar at 1.249 and climb 0.1% versus the euro at 1.174.

Alan Clarke, head of European fixed income strategy at Scotiabank, said the bright performance from key areas of the economy could see gross domestic product (GDP) revised up for the fourth quarter of 2016.

"December's industrial and construction output data were much stronger than expected.

"Yes these are backwards looking since they relate to December.

"But the preliminary fourth quarter GDP data had made assumptions for how these would perform and those assumptions were far too pessimistic.

"The punchline is that other things equal, this points to fourth quarter GDP being revised up to 0.7% quarter-on-quarter.

"It's not a done deal yet, services have the biggest weight in overall GDP and that sector has to play ball too."

Official data released in January showed the UK economy was the strongest out of the G7 nations in 2016, confounding economists' predictions Brexit uncertainty would slam the brakes on growth.

Strong consumer spending helped power growth in the final months of last year, with GDP expanding by 0.6% in the fourth quarter, in line with the second and third quarters.

Despite the resilience, economists are forecasting GDP to shrink in 2017, as soaring inflation driven by the Brexit-hit pound pushes up consumer prices and squeezes household spending power.

However, Howard Archer, chief UK and European economist at IHS Global Insight, said Friday's "hat-trick" of good news showed the UK economy was "firing on several cylinders" and not just reliant on consumer spending.