HOUSEHOLD spending was the main driver of UK economic growth in the third quarter, with exports falling sharply, official figures have shown.
The figures, published yesterday by the Office for National Statistics, showed a rise in business investment in the third quarter. But this increase was not enough to offset a tumble in business investment in the preceding three months.
Economists highlighted the degree to which consumer spending was driving growth. Some have questioned the sustainability of this, given household incomes continue to fall in inflation-adjusted terms.
And economists expressed particular disappointment about the fall in exports in the third quarter, revealed in the ONS figures.
UK gross domestic product growth in the three months to September was yesterday confirmed at 0.8%, the rate unveiled by the ONS in its first estimate of third-quarter GDP last month. The latest GDP figures showed UK household spending rose 0.8% quarter-on-quarter in the three months to September. Exports tumbled 2.4%.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "GDP growth of 0.8% in the third quarter is clearly an encouraging performance and it is particularly welcome to see business investment finally kicking in. However, while domestic demand may be looking more balanced, albeit driven markedly by consumer spending, the 2.4% quarter-on-quarter fall in exports is extremely disappointing and net trade is currently a major drag on overall activity."
He added: "If the recovery is to be sustained at a healthy pace, it really does need a marked, extended pick-up in business investment and for exports to improve.
"Consumer spending will likely remain decent, but there has to be a limit to its upside until the squeeze on purchasing power eases appreciably, and it may well be mid-2014 before earnings growth finally moves above inflation. Rising employment and an improving housing market will likely continue to support consumer spending."
Business investment rose by 1.4% quarter-on-quarter in the three months to September. But it had fallen by 2.7% in the second quarter, and the level in the three months to September was down 6.3% on a year earlier.
Samuel Tombs, UK economist at consultancy Capital Economics, said: "The second estimate of Q3 GDP confirmed that the UK economy is experiencing a period of strong growth.
"And, while the expenditure breakdown showed that household spending has remained the main driver of overall growth, the pick-up in investment provides reassurance that the recovery is beginning to broaden out."
He added: "The expenditure breakdown revealed that household spending grew by a strong 0.8% and so accounted for about two-thirds of the growth in overall GDP. While this might fuel concerns that the recovery is too dependent on consumers, note that overall investment rose by 1.4% on the previous quarter - its strongest expansion since the first quarter of 2012."
Strathclyde University's Fraser of Allander Institute warned recently that sustained economic recovery in Scotland was "by no means certain", with rising household spending an "unlikely basis" for durable growth. It noted household spending had been the main driver of recent growth in Scotland.
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