Published December 21, 2012
LONDON – Britain's dominant services sector posted meagre growth in October, official data showed on Friday, adding to the challenge for the economy as a whole to expand in the last three months of 2012.
The Office for National Statistics also said that Britain's economy grew 0.9 percent in the third quarter of the year, in slightly below previous estimates of 1.0 percent growth on the quarter.
Other ONS figures showed a deterioration in Britain's public finances in November compared to a year ago, putting further pressure on finance minister George Osborne to meet deficit reduction goals.
Third-quarter GDP growth was the strongest since the third quarter of 2007, but much of that reflected a one-off boost from the London Olympics and a rebound from the second quarter when an extra public holiday dented output.
Gross domestic product was unchanged from the third quarter of 2011, a small upward revision from the contraction that had previously been pencilled in.
Britain suffered its second recession since the financial crisis between late 2011 and mid-2012, and overall has recovered much more slowly since 2009 than most other big economies.
The Bank of England and other forecasters expect little in the way of a pick-up in the immediate future, as the economy faces headwinds from a weak global environment, government spending cuts and relatively high inflation.
Friday's services data showed that the sector - which accounts for three quarters of GDP - grew just 0.1 percent on the month in October, pointing to a weak start to the fourth quarter.
Recent ONS data has shown contraction in the retail and industrial sectors in the first part of the fourth quarter, though construction - which has been a major drag on GDP - appears to be stabilising.
A GfK consumer confidence survey released earlier on Friday showed an unexpectedly sharp fall in morale.
Friday's GDP figures showed that the household savings ratio rose to 7.7 percent, its highest since the third quarter of 2009. Households' disposable income grew 0.4 percent in real terms.
The ONS also released third-quarter current account data, which showed that Britain's deficit with the rest of the world narrowed more than expected to 12.8 billion pounds from 17.4 billion in the second quarter.
The weak economy is also weighing on Britain's public finances.
Britain's government borrowed more than expected in November as government spending rose but tax receipts fell compared to a year earlier, official data showed on Friday.
The Office for National Statistics said public sector net borrowing excluding financial sector interventions - the government's preferred measure - rose last month to 17.539 billion pounds from 16.338 billion in November 2011.
This was above economists' average forecast in a Reuters poll for 16.0 billion pounds and took borrowing in the fiscal year to date to 92.7 billion pounds, excluding the transfer of Royal Mail pension assets, up from 84.4 billion at the same point in 2011.
The Office for Budget Responsibility, Britain's independent fiscal watchdog, forecasts that public sector borrowing will total 108.5 billion pounds this year, equivalent to 6.9 percent of GDP.
When the government came to power in 2010, it planned to largely eliminate the budget deficit by 2015 with spending cuts and tax rises. But a weak economy has since forced it to extend austerity until 2018.
(Reporting by David Milliken and Olesya Dmitracova)