December 20, 2013 / 11:37 AM / in 6 years

Current account deficit balloons to highest since 1989 in Q3, GDP growth strong

LONDON (Reuters) - Britain’s current account deficit with the rest of the world ballooned to its widest since 1989 in the three months to September, despite strong economic growth.

Britain’s gross domestic product GDP.L rose 0.8 percent in the July-September period from the previous three months, in line with previous figures, but growth in earlier quarters was revised up, the Office for National Statistics said.

This meant that in year-on-year terms, growth was 1.9 percent, revised up from an earlier estimate of 1.5 percent.

Economists had expected both rates to remain unrevised.

Britain has been one of the surprise stories in the global economy this year as it turned itself from a laggard to one of the fastest-growing industrialised nations.

Data earlier this week showed very strong jobs growth but the economy, at the end of September, is 2.0 percent smaller than before the financial crisis.

However there was less encouraging news about Britain’s current account deficit. Britain’s deficit with the rest of the world widened to 20.7 billion pounds from 6.2 billion in last second quarter, equivalent to 5.1 percent of GDP - its biggest share since the third quarter of 1989.

Economists had expected the current account gap to widen to 13.85 billion pounds, but the ONS said that the drag from foreign trade and weaker investment income from abroad caused the sharper widening.

Stronger growth has also previously benefited government tax receipts, but data on Friday showed that the public finances suffered in November with public sector net borrowing at 16.505 billion pounds, up from 15.586 billion pounds a year earlier.

Public borrowing between April and November - stripping out some one-off effects - is nonetheless 2.2 percent lower than the same period in 2012 at 84.0 billion pounds.

Earlier on Friday ratings agency Standard & Poor’s affirmed Britain’s triple-A credit rating but kept a negative outlook, saying that the country would be vulnerable to a downgrade if growth was not sustained.

Bank of England Governor Mark Carney has stressed the need to keep interest rates at a record low of 0.5 percent until the recovery is more secure, something which will require more investment by companies.

Business investment in the third quarter grew by 2.0 percent, compared with an earlier estimate of growth of 1.4 percent, the ONS said on Friday.

Household spending rose 0.8 percent in the third quarter compared with the April-June period, even as real disposable income rose by just by 0.4 percent.

The savings ratio fell to 5.4 percent from 6.2 percent in the second quarter.

The Bank of England last month said it expected Britain’s gross domestic product would pick up a bit more speed to grow by a quarterly 0.9 percent in the fourth quarter and by an annual 2.8 percent in 2014.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below