Economic growth was actually weaker

Published: Tuesday 23rd December 2014 by The News Editor

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The UK economy has been growing less strongly than previously thought this year, official figures showed today.

Gross domestic product (GDP) increased by 2.6% between the third quarter of 2013 and the same period this year, down from a previous estimate of 3%.

The Office for National Statistics (ONS) said f irst-quarter growth in 2014 was revised down from 0.7% to 0.6% and for the second quarter it was 0.8%, down from 0.9%.

Third-quarter growth was unchanged at 0.7% though it saw the best growth in household spending for four years. But business investment narrowed at its sharpest rate in five years.

GDP quarterly figures for 2013 were also revised but overall growth for the year was left the same at 1.7%.

The changes mean the recovery is not as far advanced as previously thought, with the economy now 2.9% bigger than it was before the recession, rather than 3.4%.

The latest figures took into account new information covering trade data, government spending and other parts of the economy.

Household spending in the third quarter grew by 0.9%, its strongest rate since the second quarter of 2010.

But business investment fell by 1.4%, revised down from a previous estimate that it shrunk by 0.7%. The new figure was the worst performance since the second quarter of 2009.

Meanwhile, the UK current account deficit widened to £27 billion in the third quarter, equal to a record 6% of GDP.

David Kern, chief economist at the British Chambers of Commerce, said the deficit, which measures trade in goods and services between the UK and rest of the world, was at an unsustainably high level due to a fall in net investment.

He added: “Although the economy continues to grow, the recovery is not yet secure and further efforts are needed to boost business investment and to help businesses export to foreign markets.”

Samuel Tombs, senior UK economist at consultancy Capital Economics, said the latest national accounts leave the UK’s economic recovery looking more fragile than it seemed before.

He said the revisions were all the more surprising because previous GDP figures already looked a little weak relative to other survey data.

However, he added: “Despite this somewhat bleaker assessment of the UK’s recent economic performance, there remain plenty of reasons to be optimistic on the outlook for 2015.

“The recent sharp fall in the oil price and strengthening of pay growth should ensure that growth in households real incomes picks up, providing more sustainable foundations for further growth in spending.”

Published: Tuesday 23rd December 2014 by The News Editor

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