Economy grows at fastest pace for 25 months in January

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UK economic growth surged to 0.5% in January, according to official figures which smashed economists’ expectations.

The Office for National Statistics (ONS) said it was the biggest increase in monthly output since December 2016 but cautioned that growth in the three months to January remained static at 0.2%.

The figures showed 0.3% growth for the crucial services sector, which accounts for more than three-quarters of total UK output, following a disappointing contraction of 0.2% in December as consumers checked spending in the run-up to Christmas.

There was also some cheer for manufacturers as output rose for the first time in seven months – rising 0.8% on December though it was unclear whether much of the growth could be attributed to the effects of pre-Brexit stockpiling.

Construction also picked up growing 2.8% on the previous month.

The UK economy has slowed as the Brexit deadline of 29 March has neared – with consumers and businesses alike citing uncertainty over the departure from the European Union.

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However, the softening of output has been in line with much of the rest of the world as the effects of the US trade war with China dampen demand.

Economists had expected growth of just 0.2% in January. The 0.5% figure remains subject to revision.

Head of GDP (gross domestic product) at the ONS, Rob Kent-Smith, said: “Across the latest 3-months, growth remained weak with falls in manufacture of metal products, cars and construction repair work all dampening economic growth.

“These were offset by strong performances in wholesale, IT and health services.

“This sluggish growth came despite the economy bouncing back from a weak December.”

There was greater evidence of a choppy world economy when separate ONS figures showed the country’s goods trade deficit came in at almost £13.1bn in January – its highest level since June 2017.

That was despite UK export volumes returning to growth.

Market reaction was muted as it was largely dominated by sterling’s recovery the build-up to Tuesday night’s crucial vote on Theresa May’s Brexit deal though sterling did soften slightly – helping erase losses on the FTSE 100.

Rupert Thompson, head of research at KW Wealth, said of the figures: “The January GDP data provided some reassurance that the UK economy is not already heading headfast into a Brexit black hole.

“Following a worrying drop in December, GDP bounced back more than expected in January and while the 3m/3m gain was in line with expectations at 0.2%, the y/y gain was a stronger than expected 1.4%.

“Moreover, while growth of 1.4% is undoubtedly on the sluggish side, it is actually a bit higher than the growth being seen in the eurozone at the moment.”

(c) Sky News 2019: Economy grows at fastest pace for 25 months in January

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