The UK economy has continued to grow following the shock result of the EU referendum in June, figures from the Office for National Statistics (ONS) reveal.
Before the vote, some analysts had predicted that a Brexit decision would see GDP stall or even result in the economy contracting, but government data shows that the historic move did little to hamper productivity between July and September.
Over the three-month period, the economy expanded by 0.5 per cent, which was marginally slower than the 0.7 per cent growth witnessed in the previous quarter, but comfortably stronger than analysts' predictions of 0.3 per cent expansion.
No pronounced effect
The ONS said there was “little evidence” of a pronounced effect in the immediate aftermath of the vote, which helped to further dampen expectations that the Bank of England (BoE) would lower the base rate.
In the summer, the BoE’s Monetary Policy Committee made the decision to drop the base-rate to an all-time low of 0.25 per cent in order to boost spending and activity across the country.
At the time, governor Mark Carney said that further monetary stimulus was possible if the economy remained sluggish in the following months, but this appears to have been postponed in the wake of economic expansion.
Chancellor Phillip Hammond welcomed the ONS figures, saying “the fundamentals of the UK economy are strong” and that the data is evidence that the economy is resilient.
The growth was catalysed by a particularly strong performance from the services sector, which grew by 0.8 per cent during the quarter.
Manufacturing witnessed a slight contraction in output during the quarter, but Lee Hopley, chief economist at the manufacturers' organisation EEF, says this is more due to some unwinding of the “massive growth spike” seen in the second quarter, rather than industry scaling back production for any referendum-related reasons.
In line with the raft of survey data, she said the GDP estimates confirm that it has been “more or less business as usual”; a sentiment shared across many sectors where fears of a Brexit-related drop-off remain unfounded.
On the consumer front, Howard Archer, UK economist at IHS Global Insight, said it appears “certain” that third-quarter growth was also heavily dependent on consumers' willingness to keep spending, which has been supported by strong purchasing power and high employment.
The fall was in contrast to the rise to 1.1 per cent that had been predicted by economists, who said sterling's fall would push October's Consumer Prices Index upwards.
The expectation among economists had been that inflation was set to rise, fuelled by a fall in the value of sterling after the referendum, which pushed up the cost of imports.
Mark Carney has also told the Treasury committee the general thinking is that inflation will go above target, with more coming through in 2017-18 and then a tail in 2019.
Inflation has been below the Bank's two per cent target for nearly three years and in 2015 it was zero, which is the lowest since comparable records began in 1950.
Continued low rates
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