Britain's recovery propped up by consumer spending
UK economy grew 0.7% in the second quarter but lack of trade and investment growth cast shadow over data
ALTHOUGH Britain's economic recovery appears to be well underway, its sustainability has been called into question after data showed the recovery was driven by consumer spending, rather than trade and investment.
The Office for National Statistics (ONS) confirmed that in the second quarter the economy grew by 0.7 per cent and the first quarter's growth was upgraded from 0.3 per cent to 0.4 per cent.
Earlier this month George Osborne said there were "signs of a balanced, broad-based and sustainable recovery" but, according to The Independent, new data suggest the foundations may be less secure than previously thought.
Between April and June, consumer spending rose by £661m, an increase of 0.3 per cent. However, trade made no contribution whatsoever, as a surge in imports cancelled out the benefits of rising exports.
The Daily Telegraph reports that business investment fell by £786m in the three months to June to £28.7bn – a slide of 2.7 per cent and its second worst reading since the depths of the recession in September 2009.
The Government had hoped Britain's growth would be driven by exports and corporate investment, rather than relying on debt-fuelled consumer spending.
Households have been able to increase spending despite falling real take-home income by cutting into savings and easier access to credit.
Rob Wood of Berenberg Bank said that the underlying picture is that "households' real incomes were flat over the first half of the year, and the savings rate has fallen sharply."
Simon Wells of HSBC called the data a "reality check after a period of very strong UK data releases." ·