Real disposable incomes in the UK grew just 0.2% in the third quarter of 2017 as the weak pound continued to fuel inflation, official figures indicate.
Consumer spending went up 1% in the July-to-September period, the lowest rise for more than five years, the Office for National Statistics said.
The pound has fallen in value since the UK voted to leave the EU, making imported goods more expensive.
The UK’s GDP grew 0.4% in the quarter, unchanged from the previous estimate.
Latest figures show that inflation hit 3.1% in November, but pay rises are failing to keep up, with average weekly wages up by 2.3% in the three months to October from a year earlier.
The chief executive of Sainsbury’s, Mike Coupe, said that despite that discrepancy, the supermarket chain was “not seeing a massive change in behaviour” on the part of its customers.
“Spending has been broadly flat year on year – maybe ticked down very, very slightly,” he told the BBC.
The ONS added that UK households’ expenditure had exceeded income for four quarters in a row, suggesting that people are dipping into savings to fund their spending.
It said it was the first time since current records began in 1987 that this had happened over such a long period of time.
The 0.4% GDP growth figure for the third quarter is better than the 0.3% rate recorded in the first and second quarters, but weaker than the final three months of 2016, when economic growth of 0.6% was recorded.
“The UK’s performance has been rather better than the gloomy talk would suggest,” said Ian Stewart, chief economist at Deloitte.
“Growth has come in stronger than expected a year ago and the pace of activity has edged up since July.
“A whopping sterling devaluation certainly has squeezed spending power and incomes, just as you’d expect, but it’s also helped reboot manufacturing output.
“Overall, growth has slowed modestly, not collapsed. Talk of an end to UK growth has been somewhat exaggerated.”
Earlier this week, the International Monetary Fund (IMF) cut its UK economic growth forecast, blaming Brexit uncertainty.
The IMF expects UK growth of 1.6% this year, down slightly from its previous forecast of 1.7%. It expects growth to slow further next year, to 1.5%.
In a separate release, the ONS said that the UK’s dominant services sector grew 0.2% month-on-month in October, the first month of the final quarter of 2017.
Article from the ‘BBC’
