Britain’s economic recovery remains on track, with 0.7% growth in the third quarter according to the Office for National Statistics’ second estimate. However, the detailed breakdown of the data appeared less rosy. Growth was dependent on household spending and the services sector at a time when the national ambition is to rebalance towards more exports and business investment – both of which fell between July and September. Here are five key charts.
The UK economy grew for a seventh straight quarter
The broad picture of the UK economy is one of continued recovery. Gross domestic product increased by 0.7% in the third quarter, the seventh consecutive quarter of growth, albeit a slight slowdown compared with the 0.9% growth achieved in the second quarter. Britain is on track to be the fastest growing G7 economy in 2014, with growth of about 3%.
The services sector is driving recovery
All the major sectors of the economy have recovered since the depths of the crisis, when construction and manufacturing were hit particularly hard. However, the services sector – which accounts for about three-quarters of the UK economy and includes bars and restaurants, hotels and hairdressing – has outperformed other sectors and is leading the recovery. It is the only sector where output has exceeded pre-crisis levels.
Rebalancing? What rebalancing? Household spending up, exports down
The government’s much-desired rebalancing of the economy remained elusive in the third quarter. The chancellor’s vision of an export-led recovery has failed to materialise. As the chart above shows, the spending side of the economy was dominated by households between July and September. Exports fell, while imports rose, meaning that net trade was a drag on GDP over the period.
The UK’s recovery looks favourable in a global context
Growth of 0.7% in the third quarter is impressive relative to some of the world’s other advanced economies. Japan is back in recession; Germany narrowly avoided one scraping growth of just 0.1%; the eurozone economy as a whole grew by 0.2%. Recovery in the US got underway earlier than Britain, and the world’s largest economy grew by about 0.9% quarter on quarter between July and September, but the UK is expected to grow faster in 2014 overall. The International Monetary Fund is predicting UK growth of 3.2% in 2014, above its 2.2% forecast for the US and better than any other G7 country.
Britain’s trade performance remains poor
A rebalancing of the economy is dependent on a turnaround in Britain’s export fortunes. As the chart above shows, the UK is falling woefully short on this, with the trade deficit widening to £11.2bn in the third quarter from £8.9bn in the second after exports fell but imports rose. The chancellor’s target of doubling UK exports to £1tn by 2020 is looking increasingly out of reach.
