British economy ends year at steady rate amid global woes

United Kingdom economic growth improved slightly at the end of last year thanks to a strong performance by the dominant services sector, although the annual pace of growth was the weakest in almost three years, official data has showed.

The gross domestic product (GDP) edged up slightly in the final three months of the year but 2015 still finished behind the 2.9% growth enjoyed in 2014.

However, economists called the growth “lopsided” as figures revealed growth was largely reliant on the services sector, which increased by 0.7 per cent in the final quarter and was up 2.2 per cent year-on-year.

On Thursday, while on a visit to the Airbus plant in Filton, Bristol, the chancellor said: “These GDP numbers show the British economy continues to grow steadily and despite turbulence in the world economy”.

“While UK business growth is resilient, this could be challenging to maintain, given the uncertainty around the stability of the global economy. While the Bank of England probably won’t hike this year, once they start hiking next year I would expect more than one move”. The energy sector also saw a slump in output which meant that overall industrial production fell 0.2%.

The latest flash estimate from Eurostat have said that inflation is set to rise to 0.4% in January this year, rising from 0.2% last month.

“Carney’s conditions for raising interest rates – which include growth looking strong enough to eliminate the remaining slack in the economy – are probably still not met”, said Vicky Redwood, an economist at Capital Economics in London. “Global risks mean we will stick to our plan”.

Fourth quarter growth for past year is pencilled in at 0.5%, down from 0.4% in the third quarter and 0.5% in the second quarter.

However the United Kingdom economy was 1.9% higher in Q4 compared with the same quarter a year ago and higher than Q3 2015, in line with analyst estimates. Even the services sector, which dominates the United Kingdom economy, has evidenced slowing growth. “We continue to wait for George Osborne’s so-called “March of the Makers”, with construction still shrinking and manufacturing stagnating”.

GDP increased by 2.2 per cent as a whole in 2015, but this was down on 2014’s 2.9 per cent.

The economy is expanding below the trend expansion rate assumed by the Bank of England and other forecasters. The decline in domestic manufacturing slowed in December compared to previous month to 0.2%, while construction outperformed expectations, gaining 2.2% in the last month of the year after November’s decline.