Surprise dip in business investment but consumer spending remains strong

26th November 2014

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UK Business investment dropped unexpectedly in the third quarter of the year,  but consumer spending held up, official figures show.

Business investment was 0.7% lower in the three months to September, compared to the previous quarter, The Office for National Statistics revealed.

This followed second quarter growth of 3.3%, which was the fastest rate for nine years.

Yet ONS figures also showed that consumer spending increased by 0.8% in Q3.

The UK economy grew 0.7% in the quarter, in line with the initial ONS estimate, but down from Q2 growth of 0.9%.

Year-on-year growth was 3%, it said.

Howard Archer, chief UK and European economist at IHS Global Insight said that GDP growth of 0.7% was “still very decent”, however he said the growth mix was “somewhat unbalanced and disappointing” as it was heavily dependent on consumer spending, government spending and higher inventories, “which are not sustainable”.

He added: “There was a worrying relapse in business investment (down 0.7% quarter-on-quarter) while net trade was negative as exports disappointingly fell 0.4% quarter-on-quarter and imports rose 1.4% quarter-on-quarter.

“The fall in exports highlighted the handicap to UK growth currently coming from global economic softness (particularly Eurozone weakness) and sterling’s recent strength.”

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