Tuesday’s data showed some loss of momentum. Growth in the third quarter fell to 0.5 percent from 0.7 percent in the third, slower than the 0.6 percent growth most private-sector economists had expected in a Reuters poll.
But for the year as a whole, the economy grew by 2.6 percent, the Office for National Statistics said, up from 1.7 percent in 2013 and putting it on track to have been the world’s fastest-growing major advanced economy last year.
While most countries have not yet reported 2014 growth data, Britain’s is ahead of International Monetary Fund estimates for other big developed nations, a fillip for British Prime Minister David Cameron who faces a national election on May 7.
“The recovery is on track and our plan is protecting Britain from the economic storm — now is not the time to abandon that plan and return Britain to economic chaos,” Chancellor George Osborne said after the data.
Sterling weakened against the dollar and the euro as the data reinforced views that the Bank of England is unlikely to raise interest rates this year while wage growth stays weak.
It is also unclear whether 2014’s growth marks a temporary high point as the economy finally started to rebound strongly after years of sub-par growth following the financial crisis.
The IMF forecasts growth in Britain of 2.7 percent in 2015. Economists polled by Reuters predict a slowdown to 2.4 percent.
“TOO EARLY” TO CALL IT A SLOWDOWN
ONS Chief Economist Joe Grice said it was “too early to say” if this slowdown would persist.
“The dominant services sector remains buoyant while the contraction has taken place in industries like construction, mining and energy supply, which can be erratic,” he said.
Services output grew by 0.8 percent on the quarter, the same as in the third quarter. But overall GDP growth was held back by the biggest quarterly falls in construction and industrial output since 2012.
“The main disappointment with growth in the fourth quarter was that it looks unbalanced,” said IHS Global Insight economist Howard Archer.”
Weaker gas and electricity and generation dragged on industrial output — possibly linked to slightly warmer than usual weather over some of the quarter.
The retail sector drove services growth, a reminder of how Britain’s recovery remains reliant on consumers.
This was reinforced by December data from the British Bankers’ Association which showed unsecured lending to consumers grew at its fastest annual rate in six years.
In the immediate future there will be further support to household demand from the sharp drop in oil prices.
However, economists are concerned that investment may suffer from uncertainty about May’s possibly inconclusive election.
Britain’s economy is now 3.4 percent larger than its peak before the financial crisis, and about 8 percent bigger than when Cameron’s Conservative-led coalition won power in May 2010.
Much of this has been driven by a higher population and output per head is still below pre-crisis levels.
Wages are only now starting to grow faster than inflation, prompting the opposition Labour party to continue to focus on a “cost of living crisis” in the run-up to the election.
(Editing by Jeremy Gaunt)