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Household spending leads modest British economic growth
From:Xinhua  |  2017-11-24 06:48

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LONDON, Nov. 23 (Xinhua) -- The British economy continued to grow modestly in the third quarter (Q3), driven by robust consumer spending despite inflationary pressures on household budgets.

Growth in gross domestic product (GDP) was 0.4 percent in Q3, according to second revised GDP figures released on Thursday by the official statistics body, the Office for National Statistics (ONS).

The 0.4 percent quarterly rise in GDP was unchanged from the preliminary estimate, and in line with the consensus expectation.

This is an improvement on the 0.3 percent growth seen in each of the first two quarters of the year, but at about 1.7 percent annualized it remains behind the long-term trend growth of 2-2.5 percent for Britain's developed, advanced-nation economy.

"One of the key drivers in the strength of household spending has been a rebound in Q3 that counters the weakness we saw in spending on cars in Q2," Paul Hollingsworth, UK economist at Capital Economics, a finance data analysis firm in London, told Xinhua.


The figures released on Thursday pointed to a more optimistic economic outlook for the first half of 2017.

Hollingsworth said that annual consumer price inflation (CPI) had risen sharply since the Brexit referendum vote in June 2016 from 0.5 percent to 3 percent now, outstripping wage growth which is currently about 2.1 percent annually.

"It is pretty encouraging that household spending is still strong, given the squeeze we are seeing on household accounts at the moment as a result of higher inflation," said Hollingsworth.

However, the effects of the sharp inflation rise, which has raised the cost of imports and raw materials, has now largely passed through the economy, meaning the inflationary squeeze on incomes and thus on spending will start to lessen.

Uncertainty over the outcome of the Brexit process is a potential economic headwind for next year, said Hollingsworth, which could result in another sharp fall in sterling.

In addition an upward move in the global price of oil would also have an inflationary effect, but neither of these scenarios is certain.

If the economy continues in its current direction the low rate of unemployment, 4.3 percent at the end of September, and the record number of jobs means that wages are likely to start growing as employers find it increasingly hard to recruit skilled staff.

Hollingsworth said: "This is something that many forecasters have been hoping for and it hasn't happened -- so you could say we are being optimistic again -- but unemployment has fallen even further than most people would have thought. It will probably now reach the buffers and we are seeing signs of recruitment difficulties picking up."