United Kingdom economy defies gloom with 1.8pc growth in 2017

Cathal McNaughton  REUTERS

Cathal McNaughton REUTERS

The agency tweaked its growth estimate for the third quarter of 2017 on Friday, now saying that the economy grew at an annualized rate of 3.2 percent in that span. The slowdown in the October-December period reflected a worsening trade deficit and less growth in inventory restocking by companies.

To be sure, 2.6% growth is consistent with a healthy economy.

The U.S. economy gained momentum in 2017, but growth slowed at the end of the year. Demand has also been buoyed by President Donald Trump's promise of hefty tax cuts, which was fulfilled in December when the Republican-controlled US Congress approved the largest overhaul of the tax code in 30 years.

Those numbers showed the U.S. economy grew by 2.3% over the first year of Trump's presidency, a mark that indicates faster growth than last year but, so far, still falls short of Trump's goal to hit 3% in GDP growth.

In the short-term at least, James Smith, an ING economist, sees few catalysts for a further acceleration in United Kingdom growth.

Moreover, the economy has also benefited from Trump's decision of tax cuts.

The president made another attack on "predatory" and said the U.S. will not tolerate unfair trade. The left often argues that redistributive policies will result in more growth because low-income people who find themselves with extra cash usually spend it. While warning "not to get carried away", he added: "It seems like nothing can go wrong for the US economy in 2018".

That failed to match the above-3% growth in the spring and summer quarters. "I think you can go to 5 percent or 6 percent".

Mnuchin said the administration was very happy with the initial reaction from USA companies to the new tax bill, which he said had already generated pay bonuses for more than 2.5 million Americans, amounting to "literally hundreds of billions of dollars of commitments".

"[Friday's] data is another positive surprise for the economy that puts pressure on the Bank of England to raise interest rates for a second time sooner rather than later", Jasper Lawler, head of research at London Capital Group, said. That's slightly above the 0.4 percent expected on average by economists and a pickup from 0.4 percent in the third quarter.

Friday's data showed Britain's dominant services sector grew by 0.6 per cent in the fourth quarter, gaining pace after growth of 0.4 per cent in the third quarter, the ONS said.

In another sense, though, the increase in imports is a measure of the state of American manufacturing - that USA companies are not yet operating at a level of efficiency or quality that allows them to compete as strongly as we'd like to see against foreign producers. Spending on home construction surged at a rate of 11.6 percent after two quarters of declines.

"Yes, today's GDP report is evidence of the 'resurgence of a strong and prosperous America, '" said RBC senior economist Jennifer Lee, quoting President Trump's speech in Davos this morning.

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