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Household spending sustains UK growth in Q4 2015

[LONDON] Resilient household spending helped to sustain British economic growth at the end of last year, even as business investment fell, official data showed on Thursday.

The Office for National Statistics said gross domestic product rose by 0.5 per cent in the fourth quarter, unchanged from an initial estimate and as expected by most economists in a Reuters poll.

Business investment fell at the sharpest pace in nearly two years, hit by disposals in the transport equipment sector.

Household spending growth slowed only slightly to 0.7 per cent in the fourth quarter, its slowest increase of 2015, but in annual terms was still 3.1 per cent higher - matching the third quarter's eight-year high.

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Household spending has benefited from near-zero inflation and steady, if unspectacular, wage growth. The turmoil in financial markets from a darkening global outlook and Britain's approaching European Union membership referendum could yet dent strong British consumer morale.

Britain's economy grew 2.2 per cent in 2015, and the Bank of England expects it to maintain momentum at the same pace this year, although Governor Mark Carney and other policymakers have sounded increasingly cautious about the global economy.

Britain's recovery from recession was mainly led by consumer demand and policymakers have wanted to see more investment and exports to ensure a balanced and sustainable rebound.

The data showed business investment fell 2.1 per cent in the fourth quarter, compared with economists' forecasts for a 0.9 per cent rise.

The BoE has said it has seen scant evidence so far that businesses are holding back on their investment plans because of the referendum, due to be held on June 23.

Net trade also dragged on growth, subtracting 0.4 percentage points from economic growth on the quarter.

REUTERS

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