23rd December 2014
The UK economy has grown more slowly over the past year than previously thought, official figures show.
Year-on-year GDP growth has been revised down from an earlier estimate of 3% to 2.6%, according to Office for National Statistics figures.
The economy has grown 2.9% since its pre-recession peak, whereas previous estimates suggested it had grown by 3.4% Quarter-on-quarter growth was 0.7%.
The CBI’s Growth Indicator survey echoed these findings. It said that economic growth steadied in the three months to December, as the initial boost from the release of pent-up demand faded.
The survey of 792 respondents across manufacturing, retail and services showed that economic growth continued to rise, but at the slowest pace since July 2013, with a balance of +14%. This reflected a sharp fall in business & professional services growth, but was partly offset by a solid performance in the retail sector while manufacturing growth remained steady.
The pace of overall growth remained above average, and is expected to quicken in the next three months (+20%), although at a steadier pace than earlier in the year.
Rain Newton-Smith, CBI Director of Economics, said: “The economy is plotting a solid course as we head into Christmas. Whilst growth has slowed somewhat, this reflects a return to a steadier, more sustainable pace as the recent boost from pent-up demand fades.
“But the global backdrop remains a concern for firms. The weak Eurozone, slowing emerging markets and geopolitical tensions in the Middle East, Russia and Ukraine are headwinds to growth.
“While lower oil and fuel prices will leave more money in the pockets of households and businesses, it is also making life difficult for major oil producers.”
Ben Brettell, senior economist at Hargreaves Lansdown, said: “The UK economy is battling significant headwinds, most notably from the exceptionally weak economic performance of our largest trading partner (the euro zone).
“However, in my view today’s data should not be cause for concern – the broad picture remains positive. 2.6% growth is still well ahead of most of our developed-world peers (with the notable exception of the US), and the falling oil price should provide a significant boost to consumer spending in the months to come.”
“The RAC predicts petrol could soon sell for below £1 a litre, and this would ease the pressure on household budgets. Some estimates suggest the effect is probably similar to a tax cut of around £6bn – a fiscal stimulus George Osborne does not currently have the capacity to deliver. At a time of little wage growth this should be seen as a positive for the economy.”
He added: “The falling oil price is also driving down the rate of inflation, and should mean interest rates stay lower for longer. Although Mark Carney has promised the Bank of England will ‘look through’ the effect of lower oil prices, it is almost impossible to see the MPC voting for higher rates while Mr Carney is writing to the chancellor to explain why inflation has severely undershot the target.”
Chris Williams, chief executive of Wealth Horizon said: “While the Q3 figure has been left unchanged, the fact that year-on-year growth has been revised down is disappointing news and shows just how fragile the recovery remains.
“Worryingly, the update from the ONS revealed people are using their savings to fund purchases, meaning many might be eating into pots of money they need for their retirement.”