Paul Hollingsworth, Capital Economics
Thanks to the easing of the real pay squeeze and strong jobs growth,
household spending rose by 0.8% in real terms – the strongest rate since
Q2 2010 – and by 1.1% in nominal terms. Since the compensation of
employees rose by a robust 1.2%, the rise in spending is likely to have
been fully funded and not driven by households saving less. Accordingly,
the foundations on which the consumer recovery is built appear more
sustainable than a year ago, when lower saving drove growth.
What’s more, overall investment remained fairly strong, rising by a
quarterly 1% in Q3, following a 1.3% rise in Q2. However, the one piece
of the puzzle still missing is a rebalancing towards the external
sector. Indeed, net trade provided a 0.5 percentage-point drag on GDP
growth in Q3, suggesting that sterling’s strength and the weakness of
overseas demand is still weighing on exports, while growth in
import-intensive sectors is feeding through into a pick-up in imports.
David Kern, British Chambers of Commerce
These figures confirm that the UK’s recovery remains on track.
Although the pace of growth slowed compared to Q2, it is pleasing to see
annual growth at 3.0%. Yet there are some points of concern in the
detail; in particular, the slight fall in business investment is
disappointing, although annual figures still show strong growth of 6.3%.
However, the most concerning aspect of these figures is the widening
trade deficit, as exports fell and imports rose. Our exporters are
facing serious challenges abroad, so now is the time to invest even more
in supporting and promoting international trade, particularly outside
the eurozone. We expect the chancellor to address the UK’s trade deficit
in next week’s autumn statement.
Lee Hopley, manufacturers’ trade body EEF
While business investment posted a bit of a dip, this isn’t yet cause
for concern as surveys of intentions across the private sector seem to
be holding. The drag from net trade is, however, providing a bigger
challenge to rebalancing ambitions. Next week’s autumn statement needs
to ensure that the business environment for companies planning to
invest, recruit and get into new markets is a target for further action
from the chancellor.
Howard Archer, IHS Global Insight
While the overall growth performance still looked healthy in the
third quarter, the growth mix on the expenditure side of the economy was
somewhat unbalanced and disappointing. Growth was heavily dependent on
consumer spending (up 0.8% quarter-on-quarter) while there were also
significant positive contributions from government spending and higher
inventories, which are not sustainable.
While the drop in business investment could be just companies taking a
breather after very strong growth over the previous four quarters, it
may also be a sign that companies are adopting a more cautious approach
in the face of increased global growth concerns (particularly weakness
in the eurozone) and mounting political uncertainty in the UK as the
2015 general election looms. It is important for both balanced,
sustainable UK growth and for improving productivity that business
investment holds up well going forward.
Chris Williamson, Markit
Business investment fell 0.7%, dropping for the first time in over a
year. The data is volatile and subject to revision, and with the decline
coming after a 3.3% rise in the second quarter it is perhaps too early
to get too worried about a downturn in business investment. However, the
downturn in business investment is nevertheless a disappointment and
corresponds with recent survey evidence showing firms’ optimism about
the year ahead ebbing to its lowest since mid-2013. Companies have grown
increasingly worried about deteriorating economic conditions in the
eurozone as well as geopolitical uncertainties linked to the crises in
Ukraine and the Middle East, while closer to home the main concern is
uncertainty arising from the general election next year and how
government policy may consequently change.