UK GDP expands as estimated in Q4, but savings hit record low

Third estimate of UK Q4 GDP was confirmed at 0.7 percent quarter-on-quarter, in line with expectations. The quarterly growth unchanged at the prior estimate, data from the Office for National Statistics showed Friday.

The third quarter growth was revised down by 0.1 percentage point to 0.5 percent. The downward revision to Q3 growth means that annual growth was shaved further to 1.9 percent from the prior 2.0 percent.

Consumer spending remained a key driver of the economy. However, it rose at its slowest rate in a year and was just 0.4 percent when adjusted for inflation. Household real disposable income declined by 0.4 percent q/q in Q4, following a drop of 0.3 percent in Q3.

Data showed that savings hit record low in Q4. The proportion of income saved by households fell to just 3.3 percent, the lowest level on record, down from 5.3 percent in Q1. Meanwhile, business investment fell by 0.9 percent, underlining ongoing concerns about the risks posed by Brexit.

“While at a historic low, the fall in the saving ratio is partly due to changes in imputed factors and the holdings of pension funds, rather than any significant changes in the real incomes of households,” said Darren Morgan of the ONS.

Political uncertainty surrounding Brexit and signs the UK economy is slowing as Britain enters a negotiating period with the EU have seen investors take net short positions on the pound versus the dollar to record highs.