UK economic growth at the end of last year was stronger than expected, helped by stronger performances from services and industrial production.
Gross domestic product in December was up 1.5% compared to a year earlier, the Office for National Statistics calculated, up from 1.1% growth in November, and stronger growth than the 1.0% that economists expected.
On a month-on-month basis, GDP rose 0.4%, better than the 0.1% forecast.
GDP growth for the fourth quarter rose 1.4%, again beating expectations of 1.1% and up from 1.0% in the third quarter.
Real GDP expanded 0.1% quarter on quarter, following no growth in the third quarter, which was a positive surprise relative to consensus expectations of a 0.1% decline.
Better than expected but not that rosy
"Looking at the details, although the December sector data were better than expected, the overall picture for the quarter looks less rosy," said Kallum Pickering, chief economist at Peel Hunt.
Looking at the monthly data, Pickering noted that this was underpinned by a 0.4% rise in services activity and a 0.5% rise in industrial production, while construction activity declined 0.2%.
The December uptick lifted the rolling 3M/3M growth rate from -0.1% in November to 0.1% in December.
Rob Wood at Pantheon Macroeconomics said: "Monthly GDP can be erratic, and we got some payback in December for previously weak numbers.
"Conditions are hardly rosy, with the economy eeking out just 0.1% growth over the second half of last year, while monthly momentum will slow again after December’s erratic bounce.
"But growth beat the MPC’s forecast of a 0.1% quarterly fall in Q4, while the strong December GDP gain suggests the PMI was exaggerating the economic slowdown late last year, so employment is likely doing better than the qualitative surveys suggest too.
"Markets will need to place a bit more weight on rising inflation and a little less on the weak growth story."
Sam Miley at Cebr, said the UK economy returning to growth in Q4 was "welcome news [but] this feeble rate of growth is still evidence of a weak trajectory, which is expected to persist into 2025".
Miley flagged that a "further sign of the poor conditions facing the UK economy" was that GDP per capita fell by 0.1% over the quarter, with the metric having now fallen for two consecutive years, "suggesting declining living standards".
Deutsche Bank's Sanjay Raja agreed that the stronger GDP report "masks some underlying weakness in the economy", with household spending moderating and business investment retreating significantly in the final quarter.
"And net trade dragged on output – its third worst performance in the post-war period. Altogether, the UK economy is now estimated to have grown by 0.9%."
However, Raja said, it was "the best set of GDP data one could have hoped for, given survey data and hard data to end the year. But vulnerabilities remain."