- Ross Walker, an economist at Royal Bank of Scotland Group
The British economy continues to rely on domestic spending, which drove the nation's economic output to a seventh consecutive quarter of expansion. Household spending climbed 0.8% in the three months through September, the most since the second quarter of 2010, according to the Office for National Statistics. The second official estimate of third-quarter GDP showed no revision to the quarterly growth of 0.7%. On an annual basis, the UK economy grew 3%, also unrevised from an earlier estimate. On the negative side, business investment decline of 0.7%, the first drop in more than a year, and exports fall of 0.4% weighed on the economy in the third quarter. Economists said weak growth in the Euro zone suggested that exports would remain weak for a protracted period. Given the heightened external menace to the British economy, the BoE is expected to raise its key interest rate in the mid-2015. The British economy is now 3.4% above its previous peak in 2008 compared with 7.8% for the US, 9.2% for Canada and 3.1% for Germany.
A separate data by the CBI showed retailers were feeling optimistic in the run-up to the Christmas trading period. 44% of businesses reported sales growth in November compared with 17% that registered a drop. While the resulting balance of 27% was slightly below forecasts, most retailers said they expected sales to increase strongly next month.
© Dukascopy Bank SA