Consumer splurge in third quarter fuels fears for "unsustainable" recovery
The Office for National Statistics maintained growth figures unchanged at 0.8% for the third quarter
Wednesday 27 November 2013
Britain's economic growth in third quarter was driven by the biggest consumer spending spree in three years between July and September, fuelling fears that the recovery is "unsustainable".
The Office for National Statistics left overall growth unchanged at 0.8 per cent for the third quarter.
But its more detailed second estimate showed household spending, which accounts for two thirds of the economy, rising 0.8 per cent, the fastest pace since early 2010.
A feel-good summer of sporting success and hot weather lifted spending, fanned by improving consumer credit conditions. Growth in business investment has, however, been far more muted, rising a weak 1.4 per cent after a 3 per cent decline between April and June.
Exports also sank 2.4 per cent and imports increased 0.4 per cent, worsening the country’s trade balance.
Former monetary policy committee member Adam Posen tweeted: “Growth that’s half credit fuelled is unsustainable.”
The huge share of consumer spending in the economy meant that it accounted for 0.5 percentage points of the economy’s 0.8 per cent advance, overshadowing a 0.1 percentage point contribution from both business investment spending and government spending and a big drag from net trade.
Bank of England Governor Mark Carney told MPs this week he did not expect a strong upturn in business spending before next year. Consumer Prices Index inflation, at 2.2 per cent, is still running well ahead of growth in wages.
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