Outlook 2015: UK Economy

The UK economy’s strong growth over the past fifteen months was an investment led recovery. But sustaining GDP growth will become more difficult over the next few quarters

Andy Brunner 31 December, 2014 | 11:17AM

Since mid-2013 the UK economy has grown at the fastest pace of any developed economy and for 2014 is set to record 3.0% growth, the strongest annual rate since 2003. Was this just booming consumption spending and rising housing wealth powering the economy, as of old, or was it more balanced growth that can be sustained in 2015?

The UK economy’s strong 3.1% p.a. growth over the past fifteen months was no typical consumer/debt fuelled boom but rather an investment led recovery. Business investment expanded at 10.2% p.a. while, in contrast, consumer spending advanced at just 2.3%. Housing, jumped 12.6% but from an extremely low base. As for household debt, outstanding mortgage lending increased by just 1.1%, credit card debt by 2.3% while total overdrafts and structured personal loans both fell.

While the strength of business spending has proven most welcome, sustaining GDP growth around 3% will become more difficult over the next few quarters. UK households don’t have the benefit, as in the US, of a 25% fall in petrol prices, indeed, they are only around 6% below the average for much of the past three years.

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About Author

Andy Brunner

Andy Brunner  is Head of Investment Strategy, Morningstar UK

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