Poor overseas trade figures have caused the UK economy to slow down, with the result that household spending is now the main driving force of the recovery.
Official figures from the Office for National Statistics (ONS) revealed that GDP growth fell in the third quarter, standing at 0.5% at a drop from 0.7% in the second quarter.
The weaker trade figures were a result of an increase in imports as opposed to a decline in exports, with imports seeing an upturn of 5.5% - the fastest increase in almost a decade. Over the same period, exports grew by 0.9% on the previous quarter.
Philip Shaw, economist at Investec, commented: “The principal story here is one of a two speed economy, with domestic drivers performing well but with overseas demand weak.”
“Taken over the past year as a whole, net trade has subtracted 0.4% from growth, while consumer spending has added 1.9%, indicative of a growing divergence between the internally and externally facing sectors of the economy,” Shaw explained.
Even though the new figures show the economy slowing, economists still forecast solid growth of GDP over the year as a whole.
GDP was up 2.3% in the third quarter year-on-year according to the ONS data, and last year the UK economy beat many other major industrialised nations with a growth of 2.9%.
Big 4 firm PwC’s chief economist John Hawksworth said: “Today’s figures show no change in the big picture of a steady UK economic recovery led by a broad-based expansion in private sector services, but held back by weakness in both manufacturing and construction in the third quarter.”
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