Business

UK economic growth confirmed at 0.5%

A range of bank notes from £5-£20 Image copyright PA

UK economic growth in the last three months of 2015 has been confirmed at 0.5%, figures show, supported by steady growth in the services sector.

The Office for National Statistics' (ONS) second estimate of GDP growth for the quarter was unrevised.

The growth estimate for 2015 was also unchanged at 2.2%, which was the slowest annual pace since 2012.

However, the UK economy remains one of the fastest growing of the developed nations.

'Unbalanced economy'

The ONS noted that the fourth quarter of 2015 was the 12th consecutive quarter of growth, compared with the erratic pattern of behaviour between 2009 and 2012.

ONS chief economist Joe Grice said: "Once again, the buoyancy of the services sector has offset the relative sluggishness of the rest of the UK economy."

Output in UK's services sector grew 0.7% in the three months to the end of December. Household spending slowed slightly in the quarter, but still rose by 0.7%.

However, the production sector and net trade dragged on growth in the final three months of 2015.

Production output, which includes heavy industry, energy and manufacturing, contracted by 0.5% in the fourth quarter compared with the previous three months.

Image copyright AP
Image caption UK consumer spending has proved resilient

Vicky Redwood, economist at Capital Economics, warned "the recovery remains entirely dependent on consumer spending".

Chris Williamson, economist at research firm Markit, said the ONS data painted "a picture of an unbalanced economy that is once again reliant on consumer spending to drive growth as business shows increased signs of risk aversion".

"Growth is being supported by firms increasing the wages paid to workers alongside low inflation, which is clearly good for household incomes in the short term. But for a sustainable recovery, which involves improvements in productivity and profits, we also need to see business investment revive, something which will only happen when business confidence lifts higher again."

Global economy 'vulnerable'

Last month, Chancellor George Osborne warned that the economy was facing a "dangerous cocktail" of risks in 2016, ranging from slowing global economic growth to volatile stock markets and the continuing slump in oil prices.

On Wednesday, the International Monetary Fund (IMF) said the UK economy's recent performance had been "strong", but added that the referendum on EU membership was a "risk and uncertainty".

The IMF also said that the global economy had weakened further and warned it was "highly vulnerable to adverse shocks".

It said the weakening had come "amid increasing financial turbulence and falling asset prices".

The IMF's report comes before the meeting of G20 finance ministers and central bank governors in Shanghai later this week.

It said China's slowdown was adding to global economic growth concerns.

China's economy, the second-biggest in the world, is growing at the slowest rate in 25 years.

"Growth in advanced economies is modest already under the baseline, as low demand in some countries and a broad-based weakening of potential growth continue to hold back the recovery," the Washington-based IMF said.

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