Filmed by Rod Fitzgerald. Produced by Daniel Garrahan
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CHRIS GILES: The British economy grew by 0.6% in the fourth quarter of last year, a definitively healthy rate and far faster than expected after the vote to leave the European Union last June. In fact, there's been almost no impact on the UK economy's growth rate whatsoever. We can see that if you go back to 2005, we saw the pre-crisis strong period, then the deep recession in 2008, 2009, and then the gradual recovery ever since. And where do you see the Brexit vote in there? You don't really see it at all.
The economy was definitely helped by services being very strong, and particularly anything that faced consumers. In fact, if you look at retail sales, which is just a third of consumer spending, but the data we have best so far, we can see at the end of last year, it was very strong, growing at about 1.5%. And that's been continuing throughout 2015 and 2016. So consumers are very strong and spending, even though their income hasn't been growing.
Now the question, then, is, will this continue? And here, the news is not quite so good, because if you look at inflation, inflation had been very low, so people had been enjoying real growth in their incomes. But inflation is now rising, up to 1.6% in December. So with inflation growing, it means the real increase in people's incomes is going to be getting smaller. So maybe we can't expect the consumer to be holding up the British economy for much longer.