The UK economy has grown better than previously thought this year, new data shows, but plunging exports and a current account deficit ballooning to a 24-year high sowed doubts about the recovery.
Revised official figures over the last couple of years showed gross domestic product (GDP) was around £2.2 billion bigger than previously thought, with output 1.9% ahead of the same time last year – up from 1.4%.
They showed Britain’s economy was now 2% behind its pre-recession peak in 2008, rather than 2.5% as previously thought, adding to hopes that the end of the prolonged economic downturn is close at hand.
However, further data from the Office for National Statistics fuelled worries that the consumer-led recovery, apparently funded by a raid on savings, is unsustainable.
Exports fell by 3% in the third quarter – revised up from 2.4% – while the current account deficit of £20.7 billion, or 5.2% of GDP, was the highest since the same period in 1989.
Samuel Tombs, UK economist at consultancy Capital Economics, said: “The economy’s growth spurt seems to be exacerbating existing imbalances in the economy, rather than helping them to heal.”
Meanwhile, ratings agency Standard & Poor affirmed Britain’s triple-A credit status but warned that the outlook remained negative, saying this reflected “risks to the sustainability of growth”.
The new GDP figures showed growth in 2012 was 0.3%, up from a previous estimate of 0.1%, while the figure for the first quarter of this year was revised up from 0.4% to 0.5% and for the second quarter from 0.7% to 0.8%.
Growth in the third quarter remained unchanged at 0.8%, according to the data, but the construction sector’s performance was notched up from 1.7% to 2.6%.
Howard Archer, chief UK and European economist at IHS Global Insight, said it meant the overall expansion for the year could rise from 1.4% to as high as 1.9%.
The Treasury acknowledged that the recovery was stronger than previously thought but that risks remained.
The latter was highlighted by the soaring current account deficit, caused by plummeting exports, a fall in UK earnings on foreign investments, and a rise in foreign earnings on UK investments.
Figures showed that the net trade deficit more than doubled between the second and third quarter from £4.2 billion to £8.7 billion.
Investment saw a welcome rise of £800 million to £53.6 billion over the same period, though this has been largely flat over the last four quarters at a range between £52 billion and £54 billion.
Within this, business investment was up £600 million to £30.1 billion, but this was 5.3% lower than a year earlier.
Household spending was up by 2.5% on the same quarter last year – the highest such rise since the start of the downturn at the beginning of 2008.
The savings ratio – which measures the amount households have available to save – fell from 6.2% to 5.4% from the second to the third quarter. For the whole of 2012 it had been at 7.2%, up from 6.7% in 2011.
Elsewhere, the public finances took a knock as borrowing for November was up £900 million to £16.5 billion compared to the same period last year.
However this was largely attributed to changes in the way local authorities are funded, as Whitehall government receipts rose and spending fell.
Underlying public sector debt rose to a new monthly high of 76.6% of GDP, with the previous high of 76.5% set in September.