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UK Q4 current account deficit comes in bigger than expected
28-03-2014 09:37
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Question marks grew over the durability of the UK economic recovery on Friday after the country's fourth quarter current account deficit came in much higher than expected.
The deficit between October and December was £22.4bn, the second largest deficit on record after an all-time high of £22.8bn in the third quarter, according to the Office for National Statistics (ONS). Economists had expected a deficit of about £14bn.
Britain's trade deficit and a fall in revenue earned from investments abroad partly fuelled the deficit, the ONS said.
As expected, the ONS confirmed that the economy expanded at 0.7% in the fourth quarter, but 2013 annual GDP was revised down to 1.7% from the previously estimated 1.8%.
Total UK economic output remains 1.4% below the pre-financial crisis peak reached in the first three months of 2008, worse than in almost all other big advanced economies.
The savings ratio fell to 5% from 5.6% in the third quarter as weak growth in earnings prompted people to eat into their savings, fuelling fears that the consumer spending-driven recovery could run out of steam unless wages rise.
UK Economist at Capital Economics, Samuel Tombs, said a 0.4% quarterly rise in real household spending was funded by households saving less.
Tombs said: "Today's accounts may therefore raise concerns that the recovery in consumer spending is unsustainable.
"Nonetheless, a recovery in real earnings and further employment gains should provide more solid foundations for further growth in consumer spending this year.
"Accordingly, we continue to think the economic recovery can maintain the fourth quarter's pace throughout 2014."
PW
The deficit between October and December was £22.4bn, the second largest deficit on record after an all-time high of £22.8bn in the third quarter, according to the Office for National Statistics (ONS). Economists had expected a deficit of about £14bn.
Britain's trade deficit and a fall in revenue earned from investments abroad partly fuelled the deficit, the ONS said.
As expected, the ONS confirmed that the economy expanded at 0.7% in the fourth quarter, but 2013 annual GDP was revised down to 1.7% from the previously estimated 1.8%.
Total UK economic output remains 1.4% below the pre-financial crisis peak reached in the first three months of 2008, worse than in almost all other big advanced economies.
The savings ratio fell to 5% from 5.6% in the third quarter as weak growth in earnings prompted people to eat into their savings, fuelling fears that the consumer spending-driven recovery could run out of steam unless wages rise.
UK Economist at Capital Economics, Samuel Tombs, said a 0.4% quarterly rise in real household spending was funded by households saving less.
Tombs said: "Today's accounts may therefore raise concerns that the recovery in consumer spending is unsustainable.
"Nonetheless, a recovery in real earnings and further employment gains should provide more solid foundations for further growth in consumer spending this year.
"Accordingly, we continue to think the economic recovery can maintain the fourth quarter's pace throughout 2014."
PW
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