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3 years ago
UPDATE 2-UK recovery broadens, helped by long-awaited investment
February 26, 2014 / 10:46 AM / 3 years ago

UPDATE 2-UK recovery broadens, helped by long-awaited investment

4 Min Read

* Business investment and trade help drive Britain's
    * Q4 GDP unrevised at 0.7 percent qq
    * Sterling rises, data seen as welcome news for BoE

    By Andy Bruce and William Schomberg
    LONDON, Feb 26 (Reuters) - Britain's economic recovery
broadened in the last three months of 2013, driven by a pick-up
in business investment and trade that will hearten the Bank of
England and the government.
    Consumer spending and a turnaround in the housing market
have been the main drivers behind Britain's surprisingly rapid
upturn, which started last year.
    But Wednesday's data suggested a more balanced recovery may
be building, little more than a year before a general election.
    Gross domestic product rose by 0.7 percent in the fourth
quarter, the Office for National Statistics said, unrevised from
an earlier estimate and in line with forecasts.
    That capped off the fastest rate of full-year growth since
the financial crisis.
    "This provides some hope that the recovery is gaining
breadth even if, as we expect, overall growth slows during the
course of this year," Deutsche Bank economist George Buckley
    Sterling rose against the dollar to a session high
above $1.67 after the data. 
    Business investment rose 8.5 percent in the fourth quarter
compared with a year earlier, the fastest upturn since the first
quarter of 2012. Household spending rose 0.4 percent on the
    Net trade also contributed strongly to growth.
    Britain's Treasury highlighted the growth in business
investment, saying it was a sign that the government's economic
plan was working.MORE TO DO
    But a spokesman said more needed to be done and next month's
budget would seek to support investment and exports.
    Revisions to the data showed business investment grew for
four consecutive quarters for the first time since 2007.  
    BoE Governor Mark Carney has previously questioned the
reliability of the ONS's business investment data, saying other
surveys had suggested stronger growth in spending by companies.
    The central bank has said it expects a pick-up in business
investment in 2014, something it sees as essential to secure
long-awaited growth in productivity.
    The BoE has linked its record low interest rates to the
amount of spare capacity in the economy. 
    Policymakers have stressed the economy will not be weaned
off the stimulus of ultra-low borrowing costs quickly. Monetary
Policy Committee member David Miles said on Wednesday rates will
not rise, despite what appears to be the brightest economic
outlook in five years. 
    Another BoE policymaker Ian McCafferty, said in a Reuters
interview published on Tuesday that expectations the BoE will
start to raise interest rates in the spring of 2015 are "not
    Wednesday's data took Britain's full-year growth for 2013 up
to 1.8 percent, from just 0.3 percent the year before. This is
the highest since 2007, although total output is still 1.4
percent below the pre-financial crisis peak reached in the first
three months of 2008 - a weaker situation than in almost all
other big advanced economies.
    Economists polled by Reuters expect the pace of
quarter-on-quarter growth to be sustained at around 0.6 percent
through this year, taking full-year growth to around 2.6
    Business surveys have suggested the momentum behind the
recovery has largely carried through into the first months of
    In the fourth quarter, net trade contributed 0.4 percentage
points to growth after being a drag in the third quarter.
    Output in Britain's service sector - which makes up more
than three quarters of GDP - rose by 0.8 percent in the fourth
quarter, the same rate of growth as in the third quarter.
    Industrial output was 0.5 percent higher, while construction
- which accounts for less than 7 percent of GDP - expanded by
0.2 percent.

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