Economic Growth Faster Than Thought As GDP Figure Revised Up

Economic Growth Faster Than Thought As GDP Figure Revised Up
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Britain's economy grew faster than previously thought at the end of last year but the current account deficit hit its highest level since records began, according to official figures.

The Office for National Statistics (ONS) revised up its figure for gross domestic product (GDP) to 0.6% in the fourth quarter, up from the previous estimate of 0.5%.

The revision was triggered by a stronger performance from the dominant services sector and a smaller contraction within industrial production.

The current account deficit widened to £32.7 billion in the fourth quarter, compared to £20.1 billion in the third, causing the deficit as a share of national income to reach 7% - the highest deficit recorded since 1955.

The economy also fared better for the whole of 2015 than previously recorded, with GDP being revised up to 2.3% from 2.2%, the ONS said.

Chancellor George Osborne said the upward revisions to GDP meant Britain remained "one of the fastest-growing major advanced economies".

He added: "However, the UK is not immune to risks in the global economy as slowing global growth weighs on our outlook.

"Today's figures expose the real danger of economic uncertainty and shows that now is precisely not the time to put our economic security at risk by leaving the EU."

The Chancellor warned in his Budget that the UK economy still faced "dangerous cocktail risks" as a slowdown in China, increased market volatility and low commodities prices cause dark clouds to gather over the global economy.

The ONS said the UK economy was also stronger in the first quarter of last year, revising it up to 0.5% from 0.4%, while the second quarter and third quarters remained at 0.6% and 0.4% respectively.

The level of real household disposable income decreased by 0.6% in the fourth quarter, down from a 1.6% increase in the third quarter.

ONS chief economist Joe Grice said: "The latest GDP data shows the UK economy ended 2015 a little more strongly than previously thought.

"But the figures also show a fall in household incomes, with the saving ratio reaching a record low and a record current account deficit."

However, Britain's powerhouse services sector - which counts for more than three-quarters of the economy - grew by 0.2% between December and January, down slightly on growth of 0.3% between November and December last year.

The Bank of England's Monetary Policy Committee voted to keep the cost of borrowing at 0.5% in March, warning that uncertainty over the EU referendum could hit economic growth.

Despite the UK economy faring better than previously predicted, Brexit fears are likely to stay the Bank's hand before considering an interest rate hike.

Howard Archer, chief European and UK economist at IHS Economics, said UK growth remains highly dependent on consumer spending and services.

"Disappointingly for hopes of balanced UK economic activity, GDP growth in the fourth quarter of 2015 was highly dependent on the services sector on the output side of the economy and heavily dependent on consumer spending on the expenditure side."

He added: "We expect GDP growth to be limited to 1.9% in 2016. This assumes growth comes in around 0.4% quarter on quarter in both the first and second quarters, and then improves in the second half of the year as business investment and consumer spending benefits from reduced uncertainty following a decision to stay in the EU in June's referendum."