Britain's recovery driven by spending, not trade
ONS shows unbalanced growth, as consumer confidence rises to highest level since 2007
Britain's recovery is being powered by consumer spending, rather than exports and investment, raising doubts about the sustainability of this year's solid economic upturn.
The latest official estimate of GDP in the second quarter yesterday confirmed the economy grew by 0.7 per cent over the second quarter, but they also revealed this activity was driven by consumer spending and by firms building up their inventories.
Consumer spending was 0.3 per cent higher on the quarter, and up 1.8 per cent on an annual basis. The picture of a public increasingly inclined to open its wallet is supported by the latest GfK/European Commission Consumer Confidence Index which rose in September to its highest level since November 2007.
According to the Office for National Statistics net trade, which accounted for most of the 0.4 per cent growth registered in the first three months of the year, made no contribution whatsoever in the second quarter, as a surge in imports cancelled out the benefits of rising exports. Business investment fell 2.7 per cent on the previous quarter and was down by a hefty 8.5 per cent on an annual basis. Gross capital formation was positive because firms increased their stockpiles.
Earlier this month George Osborne hailed "tentative signs of a balanced, broad-based and sustainable recovery". But economists said the latest ONS figures should temper enthusiasm about the underlying strength of the recovery. "While not a disaster it provides something of a reality check after a period of very strong UK data releases," said Simon Wells of HSBC.
The household savings ratio rebounded to 5.9 per cent in the second quarter, up from 4.4 per cent in the first three months of the year. But incomes and savings were distorted over the six months by the delaying of bonuses payments between the quarters in order to take advantage of the Government's reduction in the top rate of income tax in April.
"Smoothing through that volatility the underlying picture is much clearer. Households' real incomes were flat over the first half of the year, and the savings rate has fallen sharply," said Rob Wood of Berenberg Bank.
The ONS revised up its estimate of growth in the first quarter to 0.4 per cent, from its earlier estimate of 0.3 per cent.
However, there were also modest downward revisions for the third and fourth quarters of 2012. Overall growth in the year was revised down to 0.1 per cent, from 0.2 per cent previously. The GfK index also showed improved public perception of the general economic situation over the next 12 months.
- 1 Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
- 2 Pope Francis issues top 10 tips for happiness – including don’t try to convert other people
- 3 Disney heiress Abigail disowns her share of family profits in West Bank company
- 4 The secret report that helps Israel hide facts
- 5 Israel's propaganda machine is finally starting to misfire
Russell Brand accuses FOX News anchor Sean Hannity of terrorism after aggressive Israel-Gaza debate
Pope Francis issues top 10 tips for happiness – including don’t try to convert other people
Sabina Altynbekova, the girl branded 'too good looking' for volleyball, says social media obsession with her is a 'bit much'
Justin Bieber posts Instagram photo of Orlando Bloom crying after Ibiza fight 'over Miranda Kerr'
Disney heiress Abigail disowns her share of family profits in West Bank company
The secret report that helps Israel hide facts
Land for gas: Merkel and Putin discussed secret deal could end Ukraine crisis
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Richard Dawkins tweets: 'Date rape is bad, stranger rape is worse'
Boozy, ignorant, intolerant, but very polite – Britain as others see us
- < Previous
- Next >
iJobs Money & Business
£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...
£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...
Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...
£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...