Q4’s growth deals another blow to project fear

The solid 0.6% expansion in UK GDP in the fourth quarter of last year provided further evidence that the vote to leave the European Union has so far had little discernible adverse effect on the UK economy, in stark contrast to the Treasury’s pre-referendum warnings of recession. It’s still too early to conclude that “Project Fear” has been killed off for good. The triggering of Article 50 might yet prompt a more damaging bout of uncertainty and higher inflation will squeeze households’ income growth. Nonetheless, the economy’s strong momentum supports our above consensus GDP growth forecast of 1.8% in 2017.