Revisions from the ONS mean that quarterly GDP growth in Q3 is now estimated to have been 0.6% – the same as in Q2. What’s more, business surveys suggest that this pace was maintained in Q4. Admittedly, the surveys also brought more evidence of inflationary pressures building throughout the supply chain which will squeeze real incomes. But forward-looking indicators suggest that this won’t have too large of an impact on activity. Indeed, the new orders balance of the Markit/CIPS all-sector PMI reached its highest level since April 2011 in December. What’s more, survey measures of employment and investment intentions have picked up in recent months. And housing market new buyer enquiries have recovered significantly. Accordingly, we have revised up our GDP growth forecast for 2017 from 1.5% to 1.8%, which would be down only slightly from the 2.0% we expect for 2016 as a whole.
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