UK business investment suffers surprise drop in Q3, GDP unrevised

Published Wed, Nov 26, 2014 · 09:41 AM
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[LONDON] British business investment suffered an unexpected fall in the third quarter of 2014, raising questions about the resilience of the economy's recovery, official data showed on Wednesday As initially estimated, gross domestic product between July and September grew by 0.7 per cent from the second quarter, slowing from the second quarter's 0.9 per cent which was the joint highest rate in four years, the Office for National Statistics said.

In year-on-year terms, growth was 3.0 per cent, also unchanged from last month's preliminary estimate by the ONS.

But business investment fell by 0.7 per cent in the third quarter on the quarter, its first fall since the second quarter of last year and a sharp slowdown from the previous quarter's rate of 3.3 per cent.

On the year, business investment growth slowed to 6.3 per cent, below economists' forecasts of 9.7 per cent.

The Bank of England forecast earlier this month that Britain's economy will grow by 3.5 per cent this year - making it the fastest-growing major advanced economy - but warned of headwinds from stagnation in the euro zone.

Next year it expects growth will slow to 2.9 per cent, though this would still be well above Britain's long-run average.

Consumer spending, which accounts for nearly two-thirds of Britain's economic expenditure, rose by 0.8 per cent, picking up a bit of speed from the second quarter.

The figures will offer some comfort to finance minister George Osborne, a week before he is due to deliver a half-yearly budget statement. But an unexpected shortfall in tax receipts gives him little scope to offer sweeteners to voters ahead of a national election in May.

Strong growth has also failed to translate into significant wage rises for most Britons. Earlier official data showed that average wages rose at an annual rate of 1.3 per cent in the third quarter, and Wednesday's GDP data showed that compensation of employees was 2.1 per cent over the same period, faster than the second quarter.


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