UK Economy More Reliant on Consumer Spending

        By Jon Sindreu and Jason Douglas
        LONDON--Consumer spending accelerated at the fastest quarterly pace in more than four years and drove the expansion of the U.K. economy during the third quarter, official figures show.
        The second estimate of gross domestic product, released Wednesday by the Office for National Statistics, confirmed the British economy expanded by 0.7% on a quarterly basis or at an annualized rate of 2.8% in the three months to September. The economy was 3% larger than a year earlier.
        This matches the average forecast of economists polled by The Wall Street Journal, which expected figures to be unrevised, but confirms the U.K. economy slowed its pace of growth during the period. In the second quarter, GDP rose by 0.9% quarter-on-quarter and 3.2% year-on-year.
        The growth of the U.K. economy was again driven by consumer spending--household consumption rose by 0.8%, the fastest pace since the second quarter of 2010--while business investment shrank on the quarter.
        These figures suggest consumers are set to keep supporting the U.K. economy despite trouble in the eurozone--its main market for exports--likely extending through 2015. In its global outlook released Tuesday, the Organisation for Economic Cooperation and Development predicted that the economy of the 18 countries sharing the single currency will edge up only slightly next year.
        Falling exports already made a dent in the third-quarter GDP. According to the ONS, trade made a negative contribution of 0.5%.
        Economists trust the U.K. will be able to rely on its own consumers to keep fuelling the economy, but warn that workers will need to see bigger pay checks for spending to be sustainable. Despite some early symptoms of a pickup in wages, workers have seen their purchasing power squeezed. The Bank of England warned last week that households are eating into their savings to finance the spending.
        Write to Jon Sindreu at jon.sindreu@wsj.com and Jason Douglas at jason.douglas@wsj.com
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        November 26, 2014 04:39 ET (09:39 GMT)

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