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UK household saving falls again as incomes fall short of spending UK household saving falls again as incomes fall short of spending
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UK households spent more than their incomes in the third quarter of 2017, resulting in another fall in the saving ratio, and raising doubts about the sustainability of the economy's trajectory. UK households spent more than their incomes in the third quarter of 2017, resulting in another fall in the saving ratio, and raising doubts about the sustainability of the economy’s trajectory.
In its Quarterly National Accounts, the Office for National Statistics, reported that real household disposable household incomes rose by only 0.2 per cent in the three months, while household spending picked up to 0.5 per cent.In its Quarterly National Accounts, the Office for National Statistics, reported that real household disposable household incomes rose by only 0.2 per cent in the three months, while household spending picked up to 0.5 per cent.
The resulted in a fall in the household saving ratio from 5.6 per cent to 5.2 per cent, the second lowest level in 20 years. This resulted in a fall in the aggregate UK household saving ratio from 5.6 per cent to 5.2 per cent, the second lowest level in 20 years.
The ONS confirmed that the overall economy grew by 0.4 per cent in the quarter, unrevised from previous estimates and up from 0.3 per cent in the three months to June.The ONS confirmed that the overall economy grew by 0.4 per cent in the quarter, unrevised from previous estimates and up from 0.3 per cent in the three months to June.
Three quarters of this growth was delivered by household pending, with the rest provided by business investment. Net trade made no contribution, as rising exports were cancelled out by higher imports. Three quarters of this GDP growth was delivered by household pending, with business investment, which expanded by 0.5 per cent, provided the rest.
"The deterioration in consumers’ confidence in the second half of this year suggests that households won’t continue to throw caution to the wind," said Samuel Tombs of Pantheon. Net trade made no contribution to the overall expansion in output, as rising exports were cancelled out by higher imports.
"With consumers set to struggle with a further fall in real wages, more austerity measures and rising borrowing costs, growth in households’ spending must slow over the coming quarters." “The deterioration in consumers’ confidence in the second half of this year suggests that households won’t continue to throw caution to the wind,” said Samuel Tombs of Pantheon.
Full year growth for 2017 is forecast by the Treasury's Office for Budget responsibility to come in at 1.5 per cent, which would the worst annual performance for the UK economy since 2012. “With consumers set to struggle with a further fall in real wages, more austerity measures and rising borrowing costs, growth in households’ spending must slow over the coming quarters.”
Higher inflation this year, due to the slump in the pound since the Brexit vote, has damaged real household incomes. Full-year GDP growth for 2017 is forecast by the Office for Budget Responsibility to come in at 1.5 per cent, which would the worst annual performance for the UK economy since 2012.
Higher inflation this year, stemming from the slump in the pound since the Brexit vote, has damaged real household incomes and spending has been propped up by households running down their savings and increasing borrowing on credit cards and other personal loans.
Many economists expect no UK GDP growth pick-up in 2018, despite robust global growth.Many economists expect no UK GDP growth pick-up in 2018, despite robust global growth.
"Growth in 2018 should be helped by the squeeze on consumers easing as the year progresses. However, economic activity is likely to be hampered during much of the year by still significant Brexit uncertainties which will likely limit investment in particular," said Howard Archer of the EY Item club. “Growth...should be helped by the squeeze on consumers easing as the year progresses. However, economic activity is likely to be hampered during much of the year by still significant Brexit uncertainties which will likely limit investment in particular,” said Howard Archer of the EY Item Club.
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