Business investment in surprise third quarter decline in UK

Business investment declined in the third quarter in the UK, surprising economists, who had expected an increase. Business investment fell -0.7% in Q3 from Q2. Consumer spending, on the other hand, increased by 0.8%.

In the second quarter of 2014, business investment had increased by 3.3% versus Q1, which was the highest rate of growth since 2005.

Compared to the third quarter last year, business investment grew by 6.3% in Q3 2014, the Office for National Statistics (ONS) informed on Wednesday. This was a markedly slower pace than the 11% growth between Q2 2014 and Q2 2013.

The ONS also confirmed that GDP expanded by 0.7% in Q3 versus Q2, the same as its initial estimate in October.

Business Investment UK Q3 2014

Source: ONS.

Regarding the UK’s GDP data, Lee Hopley, Chief Economist at EEF, the manufacturers’ organizations, said:

“Latest estimates confirm the UK economy continued to motor along and remains on track for growth in the region of 3% in 2014, the fastest pace of expansion since 2006. There were no negative surprises on manufacturing, which sustained a six quarter run of growth.”

“While business investment posted a bit of a dip, this isn’t yet cause for concern as surveys of intentions across the private sector seem to be holding. The drag from net trade is, however, providing a bigger challenge to rebalancing ambitions. Next week’s Autumn Statement needs to ensure that the business environment for companies planning to invest, recruit and get into new markets are a target for further action from the Chancellor.”