British economy grows at slower pace in Q3 2016, but surprised investors with higher-than-expected results, as the service sector provides resilience against negative consequences of Brexit. The expansion of 0.5% on quarter-on-quarter basis was above the median forecast for a 0.3% growth of the market participants. The services sector grew by 0.8% and offset declines in construction and industry.
The UK report for GDP covers the period from July to September, which is immediately after the referendum in which the majority of British citizens decided their country to leave the European Union. The vote led to political chaos, a sharp depreciation of the currency and the first drop in the interest rates of seven years.
However, the British economy growth is slower that second quarter, then was reported increase of 0.7%, but practically marks the 15th consecutive quarter of growth. Bank of England (BoE), which last month revised up its forecast, expecting 0.3% growth during the reported period.
The economy growth is pretty strong to convince Bank of England to refrain from easing monetary policy next week. However, economists expect to take more time until the effects of Brexit occur in the economy. The experts believe that UK GDP will expand by 1% next year, which is half less than the forecast rate. The data from the national statistics illustrate the imbalance in the pattern of growth, as services added 0.6% to GDP growth, but the industry and construction report decreases. The financial sector has a large share in service and his future is risky because of Brexit.
The foundations of the British economy are stable. The economy will have to adapt to new relations with the EU, but we are well positioned to deal with challenges.
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