Britain's economy grew less quickly than previously thought in the third quarter, with falling government spending and rising household saving raising the risk of a sharp slowdown at the start of next year.
The Office for National Statistics said UK GDP grew 0.7 per cent on the quarter, down from the 0.8 per cent previously estimated - a move it blamed on downward revisions to production, construction and business services.
Growth for the previous two quarters was also revised down. However, economists have been surprised by the resilience of the preliminary readings and said the recent growth trend was still better than most had dared hope.
"We are likely to see a further softening of GDP growth in the fourth quarter, but taken over the year as a whole, GDP growth will almost certainly be above most expectations at the start of this year," said Philip Shaw, an economist at Investec.
Second quarter growth was shaved to 1.1 per cent from 1.2 per cent previously and first quarter growth was revised down to 0.3 per cent from 0.4 per cent.
Sterling fell on the figures but recouped its losses as investors also digested minutes of the Bank of England's latest policy meeting, which showed some members becoming more worried about inflationary risks.
A breakdown of the figures showed government spending fell by 0.4 per cent in the third quarter after a rise of 0.6 per cent in the second. The fall was the largest since the start of 2009, and will undoubtedly be followed by even sharper declines as the government's aggressive austerity programme begins in earnest next year.
The household saving ratio rose to 5.0 per cent from 3.5 per cent in the second quarter, suggesting Britons are bracing themselves for tough times to come.
The government, accused by the opposition of risking the recovery with cuts that are too deep and too fast, said its deficit-reduction plan remained on track.
"This is further evidence that a gradual but sustained private sector-led recovery is underway," said a treasury spokesman.
On the year, growth in the third quarter was revised down to 2.7 per cent from the 2.8 per cent previously reported.
George Buckley, UK economist at Deutsche Bank, noted there were several optimistic signs - real incomes had bounced back and corporate profits were decent.
However, he noted that the contribution from exports had turned negative.
Balance of payments data released at the same time showed Britain's deficit with the rest of the world widened more than expected to £9.568 billion in the third quarter from £5.22 billion in the second.
Reuters
