Economy unexpectedly grows by 0.1% in Q4

Britain’s economy unexpectedly grew in the final quarter of 2024, according to new figures from the Office for National Statistics, easing pressure on chancellor Rachel Reeves.Gross domestic product (GDP) rose by 0.1% in the fourth quarter of 2024, after zero growth the previous quarter, beating forecasts of economists and the Bank of England who predicted a decline of 0.1% for the period.

The services sector increased by 0.2% in output terms over the period, while construction grew by 0.5%. This helped offset a 0.8% fall in production.

The ONS reported falls in expenditure terms in net trade and gross fixed capital formation for the fourth quarter that were offset by a large increase in change in inventories.

GDP is estimated to have grown by 0.4% in December because of growth in services and production. This followed an unrevised increase of 0.1% in November and an unrevised fall of 0.1% in October.

Commenting on the GDP figures, ONS director of Economic Statistics Liz McKeown said: “The economy picked up in December after several weak months, meaning, overall, the economy grew a little in the fourth quarter of last year. Across the quarter, growth in services and construction were partially offset by a fall in production. GDP per head, in contrast, fell back slightly in the quarter.   

“In December wholesale, film distribution and pubs and bars all had a strong month, as did manufacturing of machinery and the often-erratic pharmaceutical industry. However, these were partially offset by weak months for computer programming, publishing and car sales.” 

Barret Kupelian, chief economist at PwC, added: “Today’s GDP release confirmed that UK economic activity sprinted like a hare in the first half of the year but slowed to a tortoise-like crawl in the second. GDP grew marginally by 0.1% quarter on quarter—beating consensus but consistent with the Bank of England’s view—thanks largely to a December boost from advertising and the travel industry.

“The broader picture remains one of stagnation. However, barring any surprises, economic activity should start to pick up modestly in the second half of the year, supported by rising government consumption and the delayed effects of a less restrictive Bank of England monetary policy filtering through to businesses and households.”

Debapratim De, director of economic research at Deloitte, said: “GDP growth has come in above expectations in the fourth quarter but by a small margin. Underlying momentum remains weak. Today’s data does not change our outlook for 2025. We continue to expect sluggish growth through spring, with the fiscal easing from last year’s Autumn Budget driving a pickup in activity over summer.”

Last week, the Bank of England (BoE) voted to cut interest rates from 4.75% to 4.5%, the lowest level since June 2023.

It comes as inflation unexpectedly fell one percentage point to 2.5% in December, falling for the first time in three months, in a move that raised expectations of a rate cut this month.

The fall came as hotel prices fell and tobacco costs eased, which were credited with helping offset a jump in the cost of fuel, alongside a slowing in clothing and footwear inflation.

The bank had previously held interest rates at 4.75% in December after inflation rose for the second month in a row to 2.6% in November, marking the highest level of inflation in eight months.