Gross domestic product rose 0.7 percent from the previous three months, the Office for National Statistics said today in London. That compares with an initial estimate of 0.8 percent, which was also the median forecast of 22 economists in a Bloomberg News survey. The revision was due to production, construction and business services. Second-quarter growth was lowered to 1.1 percent from 1.2 percent.
Bank of England officials split three ways for a third month on Dec. 9, minutes of the meeting published today showed. U.K. growth may ease as the government implements the biggest budget squeeze since World War II, while officials have warned of risks from the debt crisis in the euro area, Britain’s largest trading partner.
“I think the recovery is still on track and a minor revision is not going to derail that,” said George Buckley, an economist at Deutsche Bank AG in London. “But next year is looking bit risky as consumers may retrench. I see the recovery continuing, but when the spending cuts happen we’ll have to see how people react.”
The pound initially extended its decline against the dollar after the reports were published, before regaining ground. It was at $1.5450 as of 9:36 a.m. in London, down 0.1 percent on the day. ‘Cautious’
Consumer-spending growth slowed to 0.3 percent in the third quarter from 0.8 percent in the previous three months, the statistics office said. Dixons Retail Plc, the U.K’s largest consumer-electronics retailer, said on Nov. 25 that it doesn’t expect an easy Christmas and it remains “cautious” about the economic outlook as low consumer confidence weighs on spending.
Government spending fell 0.4 percent, compared with growth of 0.6 percent in the previous quarter. Export growth cooled to 1.5 percent from 3.1 percent and investment jumped 3.4 percent, the most in four years. From a year earlier, the economy grew 2.7 percent in the third quarter, revised from an initial 2.8 percent.
Separate ONS reports today showed business investment rose 3.1 percent in the third quarter from the previous three months, while the current account deficit widened to 9.6 billion pounds from 5.2 billion pounds. As a percentage of GDP, the deficit was 2.6 percent.
Bank of England
The Bank of England kept its bond-purchase plan in place and left its key interest rate at a record low to aid the recovery this month. Adam Posen kept up his demand to increase stimulus, while Andrew Sentance voted to raise rates.
The majority “stood ready to change the stance of policy should the balance of risks shift materially,” the minutes said. “Most of those members considered that the accumulation of news over recent months had probably shifted the balance of risks to inflation in the medium term upwards.”
Recent data indicate the recovery maintained momentum in the fourth quarter, weakening the case for the authorities to add to stimulus. Jobless claims fell for a second month in November and manufacturing strengthened. Inflation unexpectedly accelerated to its fastest since May last month.
European Crisis
Still, the sovereign debt crisis in Europe may undermine U.K. export growth. It has also increased the risk of instability in Britain’s financial system, the Bank of England said last week.
At the same time, tax increases and government spending cuts may curb consumer demand. The recovery may also suffer a temporary setback from snow and freezing weather that hindered air travel, trains and shopping in the run-up to Christmas.
“Disruption caused by poor weather is usually followed by a period of faster output growth,” said Hetal Mehta, an economist at Daiwa Capital Markets Europe Ltd. in London and a former U.K. Treasury official. “Loss of output is therefore largely short term.”
To contact the reporters on this story Svenja O’Donnell in London at sodonnell@bloomberg.net; Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net
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