Belfast Telegraph

Consumer splurge sparks fears for 'unsustainable' recovery

The UK's economic growth in the third quarter was driven by the biggest consumer spending spree in three years between July and September.

This has now fuelled fears that the recovery is "unsustainable".

The Office for National Statistics left overall growth unchanged at 0.8% for the third quarter.

But its more detailed second estimate showed household spending, which accounts for two thirds of the economy, rising 0.8%, the fastest pace since early 2010.

A feelgood summer of sporting success and hot weather lifted spending, fanned by improving consumer credit conditions. Growth in business investment has, however, been far more muted, rising a weak 1.4% after a 3% decline between April and June.

Exports also sank 2.4% and imports increased 0.4%.

This worsened the country's trade balance.

Former monetary policy committee member Adam Posen tweeted: "Growth that's half credit-fuelled is unsustainable."

The huge share of consumer spending in the economy meant that it accounted for 0.5 percentage points of the economy's 0.8% advance.

This overshadowed a 0.1 percentage point contribution from both business investment spending and government spending, and a big drag from net trade.

Bank of England governor Mark Carney told MPs this week that he did not expect a strong upturn in business spending before next year.

Consumer Prices Index inflation, at 2.2%, is still running well ahead of growth in wages.

Belfast Telegraph