Economy gathered a little momentum in Q4

The latest survey evidence suggests that the economy ended 2017 on a reasonable footing. Indeed, despite a fall-back in both the manufacturing and construction PMI surveys in December, the all-sector PMI points to quarterly GDP growth of around 0.5%, a touch stronger than Q3’s 0.4% expansion. This would leave GDP growth for 2017 as a whole at 1.8%, broadly unchanged from 2016’s 1.9% outturn, and far stronger than the consensus had predicted immediately after the EU referendum. The key question is whether the economy will hold onto this resilience, or finally succumb to Brexit uncertainty in 2018. As it happens, we think that a combination of the squeeze on real incomes easing, reasonable growth in business investment and stronger support from net trade will mean that the economy maintains its momentum this year – we expect growth of 2% or so – rather than a slowdown to 1.4% as the consensus expects.