The UK economy has exceeded expectations for its performance at the end of last year, prompting a leading economic thinktank to upgrade its growth estimate for 2017.
GDP grew by 0.6pc in the final quarter of last year, according to the National Institute of Economic and Social Research, an improvement on its previous forecast of 0.5pc.
Based on this estimate, the UK economy expanded by 1.8pc in 2017.
This upward revision followed official data showing that manufacturing picked up pace and the gap between imports and exports narrowed towards the end of the 2017.
Industrial production – a measure of output from manufacturing, energy and mining industries – grew by 1.2pc in the three months to November.
Growth was largely driven by manufacturing, which expanded by 0.4pc in November. The three-month average showed the best performance for the sector in nearly a decade, with output 3.9pc higher than in the same three months of 2016. It was the first time since 1997 that output from the sector had increased for seven consecutive months.
Ole Black of the Office for National Statistics said growth was “strong and widespread” across manufacturing. Mr Black added that renewable energy projects, boats, planes and cars were also strong performing areas for exporting activity.
The trade deficit – the gap between imports and exports – narrowed by £1.2bn in the three months to November, excluding erratic sales of high value goods such as gold.
The value of goods being exported to non-EU nations saw a £2.3bn increase, but this was partly offset by an increase of £200m in imports from the EU and £900m from the rest of the world. Export growth outstripped imports by 0.8pc in the year to November.
Data showed that the construction sector continued to suffer, with a 2pc contraction from September to November. Analysis from Pantheon Macroeconomics suggests it could be on track for the worst quarterly performance in five years, as infrastructure and private building projects slumped, down 5.4pc and 3.3pc, respectively.
As an indicator of overall economic growth, industrial production accounts for 20pc of the services-heavy UK economy. The most recent data gathered from surveys has indicated that services firms were optimistic about future prospects, and expanding towards the end of last year. Optimism reached a seven month high in December, according to a survey for firms by IHS Markit.
Josie Dent of the Centre for Economics and Business Research said that UK export growth is expected to reach 2.4pc in 2018, though this could be counteracted by an anticipated 2.6pc rise in imports.
Lee Hopley of manufacturers’ organisation EEF said the sectors’ expectations for the year ahead pointed to continuing export growth, thanks to “a burgeoning global economy”. World trade is expected to grow by 4pc in 2018, according to the Netherlands’ Central Planning Bureau, the economic forecasting arm of the Netherlands’ government.