5. Services and production grew while construction continued to contract slowly

In Quarter 4 (Oct to Dec) 2017, UK gross domestic product (GDP) was estimated to have increased by 0.5%. The services aggregate was the main driver of the growth in GDP, growing by 0.6% and contributing 0.45 percentage points.

Production continued to grow, driven mainly by rising manufacturing, with a rise of 0.6% in Quarter 4 2017, contributing 0.09 percentage points to GDP. However, construction contracted by 1.0%, contributing negative 0.06 percentage points. Agriculture also contracted by 0.4% and contributed 0.00 percentage points due to its low industry weight.

Services

Services grew by 0.6% in Quarter 4 2017, up from 0.4% growth in the previous quarter. All four sectors within services experienced growth this quarter.

Despite services growth in the most recent quarter, quarterly growth compared with the same quarter a year ago showed a weakening, particularly in the more domestic consumer-facing type sectors. Here, domestic consumer-facing industries are broadly considered to be those in distribution, hotels and catering, and transport, storage and communications (Figure 3).

There has been weakening in a number of industries within these broader sectors, but most notably within accommodation, motor trades and motion pictures. However, in the case of motion pictures, this apparent weakening in growth between Quarter 1 (Jan to Mar) 2015 and Quarter 4 2017 can be largely attributed to changes in Film Tax Relief in 2014, which resulted in very strong quarter on quarter a year ago growth throughout 2015. This industry has continued to show strong growth across 2016 and 2017.

Figure 3: Growth rates of the services sector and its components, quarter on quarter a year earlier UK, Quarter 1 (Jan to Mar) 2015 to Quarter 4 (Oct to Dec) 2017 Source: Office for National Statistics Download this chart Figure 3: Growth rates of the services sector and its components, quarter on quarter a year earlier Image .csv .xls

The business services and finance sector continued to be the main driver of growth in services in the latest quarter, increasing by 0.8% and contributing 0.28 percentage points. There was broad-based growth within this sector, with the largest contributor to GDP growth being employment activities, which increased by 3.6% and contributed 0.04 percentage points.

Transportation, storage and communication experienced growth of 0.8% in Quarter 4 2017, contributing 0.09 percentage points to GDP growth. Within this sector, warehousing and support activities for transportation was the main driver of growth, with growth of 3.6% and contributing 0.04 percentage points. This follows a weak Quarter 3 (July to Sept) 2017 for this industry.

Distribution, hotels and catering grew by 0.1% (contributing 0.01 percentage points) in Quarter 4 2017. Wholesale trade and retail trade were the largest contributors to growth, increasing by 0.7% and 0.4% respectively.

Government and other services grew by 0.4%, contributing 0.08 percentage points to GDP growth. The largest contributor to this sector was human health activities with growth of 0.6% and contributing 0.03 percentage points to GDP growth. This industry has a high weight within GDP.

Figure 4: Largest and smallest quarter-on-quarter contributions of services industries to headline gross domestic product growth UK, Quarter 4 (Oct to Dec) 2017 Source: Office for National Statistics Notes: ... represents other industries in the services aggregate. Percentage points. Download this chart Figure 4: Largest and smallest quarter-on-quarter contributions of services industries to headline gross domestic product growth Image .csv .xls

Production

Within production, there was growth in three out of the four sectors in Quarter 4 2017. However, mining and quarrying fell by 3.9%, due to the well-publicised shut down of the Forties oil pipeline for a large part of December 2017. This sector contributed negative 0.05 percentage points to GDP growth.

Manufacturing was the largest contributor to growth within production, at 1.3% and contributing 0.13 percentage points. Meanwhile, electricity, gas, steam and air conditioning supply increased by 0.4% and water supply, sewerage, waste management and remediation activities increased by 0.3%.

Construction

Construction output was estimated to have decreased by 1.0% during Quarter 4 2017, following contraction in the previous two quarters. However, annual growth was 5.1% between 2016 and 2017, demonstrating that the most recent contractions are relatively small compared with the large growth throughout 2016 and into the first quarter of 2017. Figure 5 highlights how the recent contraction is relatively minor compared with the growth since 2015.

Figure 5: Construction index from Quarter 1 (Jan to Mar) 2015 to Quarter 4 (Oct to Dec) 2017 UK Source: Office for National Statistics Download this chart Figure 5: Construction index from Quarter 1 (Jan to Mar) 2015 to Quarter 4 (Oct to Dec) 2017 Image .csv .xls

Agriculture

Agriculture decreased by 0.4% in Quarter 4 2017, after an increase of 0.8% last quarter. Agriculture is the smallest of the main industrial groups with a weight of less than 1% in the output measure of GDP.