British
growth slows, but 2014 still fastest in seven years
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[January 27, 2015]
By David Milliken and William Schomberg
LONDON (Reuters) - Britain's economic
growth slowed more than expected in the final three months of last year,
but with annual growth still at its fastest since 2007 the data gave
ammunition to both sides of the political divide heading into May's
election.
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Tuesday's data showed some loss of momentum. Growth in the third
quarter fell to 0.5 percent from 0.7 percent in the third, slower
than the 0.6 percent growth most private-sector economists had
expected in a Reuters poll.
But for the year as a whole, the economy grew by 2.6 percent, the
Office for National Statistics said, up from 1.7 percent in 2013 and
putting it on track to have been the world's fastest-growing major
advanced economy last year.
While most countries have not yet reported 2014 growth data,
Britain's is ahead of International Monetary Fund estimates for
other big developed nations, a fillip for British Prime Minister
David Cameron who faces a national election on May 7.
"The recovery is on track and our plan is protecting Britain from
the economic storm -- now is not the time to abandon that plan and
return Britain to economic chaos," finance minister George Osborne
said after the data.
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Sterling weakened against the dollar and the euro as the data
reinforced views that the Bank of England is unlikely to raise
interest rates this year while wage growth stays weak.
It is also unclear whether 2014's growth marks a temporary high
point as the economy finally started to rebound strongly after years
of sub-par growth following the financial crisis.
The IMF forecasts growth in Britain of 2.7 percent in 2015.
Economists polled by Reuters predict a slowdown to 2.4 percent.
"TOO EARLY" TO CALL IT A SLOWDOWN
ONS Chief Economist Joe Grice said it was "too early to say" if this
slowdown would persist.
"The dominant services sector remains buoyant while the contraction
has taken place in industries like construction, mining and energy
supply, which can be erratic," he said.
Services output grew by 0.8 percent on the quarter, the same as in
the third quarter. But overall GDP growth was held back by the
biggest quarterly falls in construction and industrial output since
2012.
"The main disappointment with growth in the fourth quarter was that
it looks unbalanced," said IHS Global Insight economist Howard
Archer."
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Weaker gas and electricity and generation dragged on industrial
output -- possibly linked to slightly warmer than usual weather over
some of the quarter.
The retail sector drove services growth, a reminder of how Britain's
recovery remains reliant on consumers.
This was reinforced by December data from the British Bankers'
Association which showed unsecured lending to consumers grew at its
fastest annual rate in six years.
In the immediate future there will be further support to household
demand from the sharp drop in oil prices.
However, economists are concerned that investment may suffer from
uncertainty about May's possibly inconclusive election.
Britain's economy is now 3.4 percent larger than its peak before the
financial crisis, and about 8 percent bigger than when Cameron's
Conservative-led coalition won power in May 2010.
Much of this has been driven by a higher population and output per
head is still below pre-crisis levels.
Wages are only now starting to grow faster than inflation, prompting
the opposition Labour party to continue to focus on a "cost of
living crisis" in the run-up to the election.
(Editing by Jeremy Gaunt)
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