Brexit latest: Economy grew by 0.5 per cent in Q4 2016, says Niesr

Think tank estimates full year growth of 2 per cent

The economy grew by 0.5 per cent in the final quarter of 2016, according to the latest forecast from the National Institute of Economic and Social Research (Niesr).

That would follow an official estimate of growth of 0.6 per cent in the third quarter and take full year GDP growth to 2 per cent.

Economists had widely expected the economy to slow sharply in the wake of the Brexit vote in June, with many expecting a recession.

But after a plunge in survey indicators in June, there was a bounce back and robust household consumption has powered growth for the past six months.

However James Warren, Research Fellow at Niesr, stressed that the composition of economic growth in 2016 has been "unbalanced".

"Robust consumer spending has compensated for the weakness in other sectors. Consumers face significant head winds this year and next, not least the increase in consumer price inflation that is a consequence of pass through from the depreciation of sterling in 2016,” he said.

Q4 2016 forecast: no slowdown yet

Niesr

​The Bank of England and the Office for Budget Responsibility both expect GDP growth to moderate sharply this year, with both pencilling in growth of 1.4 per cent.

Niesr itself also expects growth in 2017 to fall to 1.4 per cent and says there are "downside risks" due to the uncertainty that could follow Theresa May's invoking of Article 50, which will officially start the two-year Brexit divorce proceedings.

Niesr has also projected consumer price inflation to jump to 3.8 per cent next year, from 1.2 per cent now and for employment to jump to 5.6 per cent, from below 5 per cent currently.