LONDON (Bloomberg) — Consumers drove the U.K. economy to a seventh straight quarter of growth in the three months through September as the euro-area slump held back exports and investment plunged.
Household spending rose 0.9 percent, the most in more than four years, accounting for almost all of the economy’s 0.7 percent growth in the quarter, the Office for National Statistics (ONS) said in London Tuesday. Consumer-spending growth was revised higher from the 0.8 percent previously published. Gross domestic product matched the prior estimate.
Falling oil prices and slowing inflation are helping to support domestic demand, the main driver of Britain’s economy this year. Discounting by retailers is also boosting activity at stores, countering a weaker external environment.
“While the overall growth performance still looked healthy in the third quarter, the growth mix on the expenditure side of the economy was somewhat unbalanced and disappointing,” said Howard Archer, chief European economist at IHS Global Insight in London.
From a year earlier, the economy grew 2.6 percent in the third quarter, revised down from 3 percent. Revisions to quarters going back to the start of 2013 cut the level of GDP, which is now 2.9 percent above its previous peak in early 2008 instead of the 3.4 percent previously estimated.
U.K. exports rose 0.6 percent in the third quarter while imports increased 1.3 percent. Net trade subtracted 0.2 percentage point from GDP. Business investment fell 1.4 percent, double the drop initially reported, knocking 0.1 percentage point from growth. The drop was the biggest since 2009.
Separately, the ONS said the current-account deficit widened to a record 27 billion pounds, or $42 billion, in the third quarter from 24.3 billion pounds. The increase was mainly due to lower receipts and higher payments on direct investment income.
David Kern, chief economist at the British Chambers of Commerce, said the deficit is now “unsustainably high.”
With the euro-area economy barely growing, the U.K. remains reliant on domestic spending. The Bank of England kept its benchmark interest rate unchanged at a record-low 0.5 percent on Dec. 4 after a debate among policy makers about when to respond to the strengthening labor market.