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Roundup: Modest British economic growth defies Brexit gloom predictions

Xinhua,December 23, 2017 Adjust font size:

LONDON, Dec. 22 (Xinhua) -- Brexit uncertainties failed to seriously derail British economic growth, with GDP increasing 0.4 percent in the third quarter (Q3), an increase from the 0.3 percent of the previous quarter, figures showed Friday.

"It's a middle of the road performance, really. You would have hoped Britain could have done a lot better, but it could have been a whole lot worse," economist Dr. Howard Archer told Xinhua.

The Office for National Statistics (ONS) released the final revised figures for Q3 on Friday, with some significant revisions upwards for the data compared with earlier versions.

Economic growth was "better than was expected at the beginning of the year, and not catastrophic considering some of the expectations that Brexit would weigh down heavily on growth," said Archer, chief economic adviser to EY Item, a London-based financial data firm.

Brexit's effect has been principally felt in the domestic British economy with sharply-higher inflation, with Consumer Price Index (CPI) inflation at 3.1 percent in November (the latest figures).

This is a steep rise from the 0.5 percent inflation at the time of the Brexit referendum in June 2016, and was prompted by a sharp and immediate fall in sterling from 1.48 U.S. dollars to 1.22 U.S. dollars. This increased the price of imports, raw materials, and supply chain costs.

Consumers have been driving economic growth, but higher inflation has outstripped the healthy growth in wages.

Wage settlements accelerating to 2.5 percent in the three months to the end of October, up from 2.2 percent in the three months to the end of September.

But inflation is higher, and continued consumer spending has come at the expense of eroded savings and is likely unsustainable, and annual growth in consumer spending is lackluster.

Archer said: "The pick-up in consumer spending quarter on quarter 0.5 from 0.2, but year rate was only 1 percent the weakest since Q1 2012."

"Consumer spending picked up but at the expense of consumers having to dip into their savings. Real household disposable income was only up 0.2 percent quarter on quarter and 0.4 percent year on year, so the savings ratio fell back to 5.2 percent from 5.6 percent."

Consumer spending figures also benefited from weak sterling, with more foreign visitors coming to Britain, while Britons made domestic vacations, said Archer.

The Q3 figures point to growth of 1.8 percent this year, not far off the long-term trend rate of 2 to 2.5 percent.

Archer said: "It now looks like growth this year will come in at 1.8 percent, assuming growth remains the same at 0.4 percent in Q4."

Global economic growth is robust, and Archer said it would be expected that an open economy like Britain's would benefit from that and record stronger growth. Enditem