Consumer spending lifts UK economic growth

The UK economy grew by 0.6% during the third quarter of last year, according to the latest ONS data. This is slightly faster than earlier ONS estimates. The rise lifted the annual growth in the economy to 2.2% between the third quarters of 2015 and 2016. Consumer spending, which accounts for 62% of UK expenditure, was the main driver for UK growth. Household spending rose by 0.7% during the third quarter to stand 2.6% up on a year earlier. The rise in spending was despite a 0.6% drop in real household incomes, with households increasingly funding their spending through higher borrowings and by reducing their savings. Fixed investment rose 0.9% during the quarter to stand 0.5% higher than a year earlier. Higher government investment was the main driver during the quarter, growing by 5.5%. In contrast business investment rose by just 0.4% and was 2.2% lower than during 2015 Q3. Services were the fastest growing part of the UK economy, rising by 1.0% during the quarter to stand 3.1% higher than a year earlier. In contrast manufacturing output shrunk by 0.8% during the third quarter, but was 0.5% up on a year earlier. Construction output also fell 0.8% during the quarter but was 1.7% still ahead of 2015 Q3. The drop in construction output follows the weakening in project starts reported by Glenigan during the first half of 2016. The more recent improvement in project starts recorded by Glenigan should help support construction output during the opening months of 2017.