Incomes decline as UK confronts triple-dip slump
Source: Bloomberg News |
March 28, 2013, Thursday
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Print Edition
Print Edition
BRITONS' disposable income fell in the fourth quarter, underlining the pressure on consumers as the economy teeters on the brink of an unprecedented triple-dip recession.
Household incomes adjusted for inflation slipped 0.1 percent from the previous three months, the Office for National Statistics said yesterday in London. Gross domestic product fell 0.3 percent, the same as previously estimated.
The Office for Budget Responsibility cut its growth forecasts last week and Chancellor of the Exchequer George Osborne said it will take longer than previously thought to bring debt under control, prompting Fitch Ratings to move a step closer to stripping the country of its top credit rating. GDP is at risk of contracting again this quarter, marking the third recession in five years. Concern over the economy has weighed on the pound this year.
Triple-dip recession
"Today's figures confirm that the UK economy finished last year on a very weak footing and keep alive the risk of a triple-dip recession," said Samuel Tombs, an economist at Capital Economics Ltd in London. "The figures are therefore a timely reminder of how much progress still needs to be made towards getting the economy back to a sustainable path."
A separate statement from the Bank of England said UK lenders must raise 25 billion pounds (US$38 billion) to make up a shortfall in capital to cover higher estimates for expected loan losses, potential fines and better risk calculations.
The ONS report confirmed that trade and investment acted as the biggest drag on the economy in the fourth quarter, casting doubt on Prime Minister David Cameron's claim to be rebalancing the economy away from spending by consumers and the government.
Exports fell 1.6 percent and net trade contributed 0.2 percentage point of the overall decline in GDP, suggesting exporters are seeing little benefit from the pound's decline.
Deficit narrows
The current-account deficit narrowed to 14 billion pounds in the fourth quarter from 15.1 billion pounds in the previous three months, the ONS said separately yesterday. While the trade balance widened, Britain swung to a surplus on its income balance.
Business investment fell 0.8 percent in the quarter instead of the 1.2 percent decline previously estimated, wiping 0.1 point from GDP. Consumer spending rose 0.4 percent instead of 0.2 percent.
On the output side, there was a downward revision to industrial production, which fell 2.1 percent, the most since 2009, amid shutdowns of North Sea oil production. Services were flat, revised from a drop of 0.1 percent. GDP excluding oil and gas extraction fell 0.1 percent on the quarter.
The household savings ratio fell to 6.7 percent in the final quarter of 2012 from 7.9 percent in the previous quarter. The ratio rose to 7.1 percent last year, the highest since 1997, as people saved rather than spend.
Net disposable income rose 2.1 percent last year, the biggest gain since 2003. While a rise in the number of people in work lifted wages and salaries by 3 percent, just above the rate of consumer-price inflation, basic pay is rising at a slower pace. Earnings were also boosted by social benefits and dividends.
Household incomes adjusted for inflation slipped 0.1 percent from the previous three months, the Office for National Statistics said yesterday in London. Gross domestic product fell 0.3 percent, the same as previously estimated.
The Office for Budget Responsibility cut its growth forecasts last week and Chancellor of the Exchequer George Osborne said it will take longer than previously thought to bring debt under control, prompting Fitch Ratings to move a step closer to stripping the country of its top credit rating. GDP is at risk of contracting again this quarter, marking the third recession in five years. Concern over the economy has weighed on the pound this year.
Triple-dip recession
"Today's figures confirm that the UK economy finished last year on a very weak footing and keep alive the risk of a triple-dip recession," said Samuel Tombs, an economist at Capital Economics Ltd in London. "The figures are therefore a timely reminder of how much progress still needs to be made towards getting the economy back to a sustainable path."
A separate statement from the Bank of England said UK lenders must raise 25 billion pounds (US$38 billion) to make up a shortfall in capital to cover higher estimates for expected loan losses, potential fines and better risk calculations.
The ONS report confirmed that trade and investment acted as the biggest drag on the economy in the fourth quarter, casting doubt on Prime Minister David Cameron's claim to be rebalancing the economy away from spending by consumers and the government.
Exports fell 1.6 percent and net trade contributed 0.2 percentage point of the overall decline in GDP, suggesting exporters are seeing little benefit from the pound's decline.
Deficit narrows
The current-account deficit narrowed to 14 billion pounds in the fourth quarter from 15.1 billion pounds in the previous three months, the ONS said separately yesterday. While the trade balance widened, Britain swung to a surplus on its income balance.
Business investment fell 0.8 percent in the quarter instead of the 1.2 percent decline previously estimated, wiping 0.1 point from GDP. Consumer spending rose 0.4 percent instead of 0.2 percent.
On the output side, there was a downward revision to industrial production, which fell 2.1 percent, the most since 2009, amid shutdowns of North Sea oil production. Services were flat, revised from a drop of 0.1 percent. GDP excluding oil and gas extraction fell 0.1 percent on the quarter.
The household savings ratio fell to 6.7 percent in the final quarter of 2012 from 7.9 percent in the previous quarter. The ratio rose to 7.1 percent last year, the highest since 1997, as people saved rather than spend.
Net disposable income rose 2.1 percent last year, the biggest gain since 2003. While a rise in the number of people in work lifted wages and salaries by 3 percent, just above the rate of consumer-price inflation, basic pay is rising at a slower pace. Earnings were also boosted by social benefits and dividends.
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