Britain's economy expanded at a faster-than-expected pace in the final three months of last year as solid consumer spending supported growth and defied projections of a post Brexit-vote slowdown.
The U.K.'s Office for National Statistics said Thursday that GDP grew 0.6% in the fourth quarter, broadly flat when compared to the three months ending in September but ahead of analysts forecasts of a 0.5% advance. The year-on-year expansion was measured at 2.2%, the ONS said, again stronger than the 2.1% print forecast by economists.
"The initial ONS data shows the economy ended 2016 with steady growth of 0.6% for the third consecutive quarter," the agency said in its official release. "Strong consumer spending supported the expansion of the dominant services sector and although manufacturing bounced back from a weaker third quarter, both it and construction remained broadly unchanged over the year as a whole."
The pound, which had been trading at a near six-week high of 1.2654 ahead of the 09:30 GMT release, weakened modestly to 1.2646 following the data, although that has to be set against a broader gain for the U.S. dollar index, which is trading 0.26% higher a 100.01.
The outgoing data in the third quarter, however, does suggest that the consumer spending support may not last.
Last month, U.K. retail sales fell the most in more than four and a half years, the country's official statistics office said Friday, as consumers pulled back on spending amid rising inflation and broader economic uncertainty.
Retail sales fell 1.9% from the previous month, the ONS said, the biggest decline since April 2012 and much larger than the -0.1% dip anticipated by economists. November's figures, which were originally estimated at +0.2%, were revised by the ONS to -0.1%. The December decline was the largest since April 2012.
Big ticket household items were the biggest decline, ONS data indicates, with sales down 7.3% from November while clothing and footwear sales fell 3.7%. Food sales fell 0.5%.
That followed U.K. inflation figures which showed consumer prices accelerating at the fastest pace in two and a half years last month as the post-Brexit collapse in the pound continues to drive consumer prices, the ONS confirmed earlier this week.
Inflation hit a 1.6% clip in December, up from 1.2% in the previous month and well ahead of the 1.4% rate forecast by analysts. It's the fastest pace of consumer price acceleration since July 2014, according to ONS tables.
Inflation has ticked higher each month -- apart from October -- since the country voted to leave the European Union on June 23 in concert with the pound's rapid decline on foreign exchange markets. The Bank of England's preferred measure of the currency's value, the trade-weighted sterling index, has fallen 13% since the Brexit vote and some 20% against the U.S. dollar.
Import costs, the ONS said, rose 16.9% from the same period last year, the fastest rate of increase since July 2011, while factory costs accelerated by 15.8%.