January 28, 2016 / 9:35 AM / 3 years ago

Annual GDP growth slows to weakest in nearly three years in fourth quarter

LONDON (Reuters) - Britain’s economy ended 2015 on a soft note after the annual pace of growth slowed to its weakest in nearly three years as the global economic slowdown weighed on its previously rapid expansion.

Fourth-quarter gross domestic product grew by 0.5 percent, up slightly from 0.4 percent in the three months to September, the Office for National Statistics said on Thursday, and in line with economists’ forecasts.

Output in the three months to December was 1.9 percent higher than a year earlier, down from 2.1 percent in the third quarter and the smallest increase since early 2013.

The figures are likely to ease worries that Britain is facing a sharp economic slowdown, as domestic demand appears to have remained resilient. But they suggest that the robust growth of the past two years will not return until the world economy regains strength.

Bank of England Governor Mark Carney said last week that he wanted to see above-average growth and a pick-up in wages before raising rates, and economists now do not expect the central bank to move until the tail end of this year.

For 2015 as a whole, Britain’s economy grew 2.2 percent, down from 2.9 percent in 2014, when it was the fastest-growing major advanced economy. The global slowdown means Britain is still likely to have remained near the top of the pack in 2015.

Global growth has slowed since the middle of 2015 as China’s rapid expansion lost pace and a slump in oil and commodity prices roiled other emerging economies.

Last week the International Monetary Fund forecast that Britain’s economy would maintain an annual growth rate of 2.2 percent through 2015, 2016 and 2017 — slightly above the average for other advanced economies.

The ONS said the slight pick-up in the quarterly rate of growth was driven by Britain’s large services sector, which expanded by 0.7 percent, its fastest rate in just over a year, helped by gains in business and financial services.

Workers walk on the production floor of Invertek Drives based in Welshpool, Wales, April 24, 2015. REUTERS/Rebecca Naden

Industrial output recorded its first fall since late 2012. Manufacturers have reported being buffeted by weak foreign demand and the strength of sterling, and mild weather also depressed demand for oil and gas during part of the quarter.

Construction output dropped by 0.1 percent on the quarter after a 1.9 percent fall in the previous three month period.

However, consumer demand has remained broadly solid, with previous data showing retail sales enjoying their strongest quarter of growth in a year, bolstered by falling prices in stores and record levels of employment.

Reporting by David Milliken and Ana Nicolaci da Costa

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