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British Economy Expanded in Q4, says Thinktank


January, 11 2018
watermark Economic news

Based on the Thinktank's forecast, the longest period of increasing factory output in Britain over 23 years has led the British economy to reach its fastest pace of growth rate recorded in late 2016. The National Institute of Economic and Social Research (NIESR) outlines the GDP expansion for 0.6 percent in the fourth quarter of 2017, showing higher figures compared with the 0.4 percent in the previous quarter and further exceeded the latest City projections.


Amit Kara, Head of UK macroeconomics research at NIESR, stated that the activity showed an improvement during the second half of 2017, after a sluggish start in 2018 in which the GDP grew by 0.3 percent in Q1 and Q2.


The Thinktank expects that the strong economic performance of the country accompanied by high inflation rate will prompt the Bank of England to implement interest rate hike by 0.25 points to 0.75% in May. Followed by further growth every six months until 2021, as official borrowing costs gained 2 percent.


The Office for National Statistics (ONS) issued a data that indicates the rise in output of UK factories for eighth straight months in November, this achievement was reported in May 1994, driven by the broad upswing of manufacturers in the world economy. The manufacturing output came in 1.4 percent higher in three months until the end of November versus the recent quarter.


As the factory output increased, the overall industrial production also picked up by 0.4 percent which includes products from energy plants, mines, quarries and oil and gas sector. The sudden spell of cold weather in November supported energy production on the back of the warmer climate in October.


The manufacturers of machinery and equipment fabrication contributed major growth, as projects under renewable energy recovered coupled with other costly works. The optimistic prospects for the industrial production provided 14 percent of the GDP result, which helped negate the stumbling growth in consumer expenditure due to rising cost of imported goods since the Brexit referendum and further depreciated the British pound.


On the other hand, the construction industry remains to have a difficult time for more than five years, showing a 2 percent reduction in three months to November and marked the sixth consecutive period of contraction. However, there was still a slight improvement in November by 0.4 percent amid the decline in the past quarter.


The robust global economy supports the United Kingdom in exporting additional products and services towards different parts of the world. The ONS reported that the UK still have higher imports than exports since in the past but the deficit was reduced by  £2.1bn ($2.8bn) in the three months to November. Moreover, economists suggest that growth in Q4 last year would be lower than the predictions of NIESR because of complication in Forties oil pipeline in December.


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