UK economic growth improves in fourth quarter, ONS reveals

The UK economic growth picked up slightly in last three months of the year compared to the previous quarter, data revealed on Thursday.

Gross domestic product rose 0.5% quarter-on-quarter in the fourth quarter, as expected by analysts, up from 0.4% in the prior three-month period, according to the preliminary estimate from the Office for National Statistics.

The improvement was supported by a 0.7% increase in services and a 0.6% gain in agriculture, offset by declines in production and construction output, down 0.2% and 0.1% respectively.

"The 0.5% quarterly rise in GDP was in line with expectations and a slight improvement on Q3’s 0.4% rise. But it was still a bit below the economy’s probable trend rate, meaning that growth still isn’t strong enough to meet one of (Bank of England Governor Mark) Carney’s three conditions for raising interest rates," said Vicky Redwood, chief UK economist at Capital Economics.

The BoE announces its latest policy decision next Thursday but its expected to keep interest rates unchanged at 0.5% amid weak global growth and low inflation.

On a year-on-year comparison GDP slowed to 1.9% growth in the fourth quarter from 2.2% in 2014, in line with estimates. GDP as a whole increased by an annualised 2.2% in 2015 following a 2.9% rise a year earlier.

"This slump will not have taken many by surprise as poor retail sales data, and mounting concerns over the volatility of global markets, have continued to have a direct impact on the British economy," said Dennis de Jong, managing director at UFX.com.

Ben Brettell, senior economist at Hargreaves Lansdown said the bigger picture of the economy was that growth remains "lacklustre, but reasonably resilient".

"A slowdown in emerging markets combined with increased uncertainty in global financial markets was bound to weigh on growth, but the domestic economy remains in reasonable health despite these headwinds," he said.

Brettell said revisions to fourth quarter GDP were likely in coming months, given that it was the first estimate. Looking ahead, oil prices should aid the consumer but weak wage growth and low inflation are not strong enough for the BoE to consider raising interest rates, the economist added.