UK GDP: Sterling (GBP) rises as the economy grows at faster than expected rate but consumer spending worries persist
The UK economy has grown at a faster than expected rate over the last 12 months, according to official figures released today.
The Office for National Statistics (ONS) revised its estimate for third quarter year-on-year growth from 1.5 to 1.7 per cent.
Growth over the three months to September was 0.4 per cent, unrevised from previous estimates.
Sterling strengthened in the minutes after this morning’s announcement, jumping from 1.3372 to 1.3390 against the US dollar.
However, third quarter deficit figures disappointed, after widening by £22.78bn, compared with expectations of £20.2bn.
“After a series of disappointing UK GDP reports, the British government will breathe a sigh of relief after today’s results came in above expectations,” said UFX managing director Dennis de Jong.
While there will be giant strides required to drag the UK back to comparable levels with growing eurozone powerhouses such as Germany and France, it’s a small step in the right direction for the British economy.
Read more: Economists nervous as consumer spending continues to fuel UK GDP growth
Household income
But analysts also pointed to a worrying trend of small rises in households’ real disposable incomes. Pantheon chief economist Samuel Tombs highlighted a 0.2 per cent quarter-on-quarter rise.
“Households funded most of the rise in real spending by reducing their saving rate to 5.2 per cent, from 5.6 per cent,” he said.
The deterioration in consumers’ confidence in the second half of this year suggests that households won’t continue to throw caution to the wind. So, with consumers set to struggle with a further fall in real wages, more austerity measures and rising borrowing costs, growth in households’ spending must slow over the coming quarters.
De Jong added: “Lingering inflation affecting the spending power of households, and wage growth unlikely to surge any time soon, means the UK could remain in the slow lane for economic growth in the early stages of next year.
“While Brexit negotiations continue to move along slowly, any swift agreement on a transition deal could help bolster the UK’s economic prospects. The public will hope that David Davis has irons in the fire to progress talks in the early months of 2018, which could further increase UK GDP momentum.”
Read more: UBS delivers chunky UK GDP growth upgrade