GDP revised down as growth struggles to pick up pace

SHAFAQNA – The British economy has been growing at more of a trot than a canter, according to fresh revisions to GDP figures released today.Output in the third quarter of 2014 was only 2.6 per cent higher than in the corresponding period of 2013, not the 3 per cent previously estimated, the Office for National Statistics said.

It also revised downwards its estimates for growth in the first and second quarters of this year.

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

One disappointment was the latest estimate for business investment, which declined between the second and third quarters.

Economists see significant growth in business investment – spending on plant, machinery, intellectual property and stocks – as crucial if the largely consumption-driven recovery of the past 18 months is to be sustained.

The quarter-on-quarter growth figure was unchanged at 0.7 per cent because estimates for output in both the second and third quarters were downgraded by a similar amount.

Howard Archer of IHS Global Insight said the overall growth performance was still healthy but the relapse in business investment was a worrying development.

“While it could be just companies taking a breather after very strong growth over the past four quarters, it may also be a sign that companies are adopting a more cautious approach in the face of increased global growth concerns, particularly weakness in the eurozone, and mounting political uncertainty in the UK as the 2015 general election looms.”

On the expenditure measure of GDP, real household disposable income fell 0.1 per cent compared to the previous quarter, as weak earnings growth continued to hamper living standards. The savings ratio – the proportion of household income saved – came in at 7 per cent.

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

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