U.K. Robust Q3 Growth Signals Resilience Post-Brexit

The U.K. economy expanded more-than expected in the third quarter as robust growth in services offset the contractions in other sectors, adding strength to the view that the impact of the 'Brexit' vote was less severe than thought earlier.

Gross domestic product climbed 0.5 percent sequentially in third quarter, preliminary data from the Office for National Statistics revealed Thursday.

The expansion was faster than the expected growth of 0.3 percent. Nonetheless, the pace of growth eased from 0.7 percent in the second quarter.

On a yearly basis, GDP advanced 2.3 percent, while economists had expected the rate to remain stable at 2.1 percent.

This was the first release of GDP covering a full quarter of data following the 'Brexit' vote in late June.

The ONS said the pattern of growth continues to be broadly unaffected following the EU referendum with a strong performance in the services industries offsetting falls in other industrial groups.

Latest GDP figures confirmed that the immediate economic impact of the vote to leave the EU has not been nearly as severe as many had initially expected, Ruth Gregory, a U.K. economist at Capital Economics, said.

The upbeat figures mean that the chances of a cut in Bank Rate at next week's MPC meeting have probably fallen to less than 50 percent, the economist added.

Meanwhile, IHS Global Insight economist Howard Archer expects the economy to suffer in 2017 as the uncertainties facing businesses and consumers are magnified by the triggering of Article 50.

Further, the fundamentals for consumers are highly likely to increasingly weaken as their purchasing power is diluted by markedly rising inflation and muted earnings growth, the economist said.

On the production side, the dominant services sector grew 0.8 percent. In contrast, output decreased in the other three main industrial groups.

Construction output fell 1.4 percent and by 0.7 percent in agriculture. Production shrank 0.4 percent, within which manufacturing decreased 1 percent.

Another report from the ONS showed that services output gained 0.2 percent in August from July, when it climbed 0.4 percent. The index of services grew 3.2 percent in August from prior year.