Our current account deficit has risen sharply and is way above estimates

Catherine Neilan
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A Zimbabwean man shakes on August 1, 200
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The ONS has just published the UK's current account deficit for the fourth quarter of last year and the figure has risen sharply.

Our current account deficit was £32.7bn, or seven per cent of GDP (though this has - callooh callay - been revised upwards). This compares with the third quarter's figure of £20.1bn. It's also way above estimates, which had it coming in at £21.2bn.

We're borrowing more at a household level

Meanwhile net borrowing by households and non-profit institutions serving households (NPISH) rose 48 per cent to £12.bn between October and December, as the level of disposable income fell 0.6 per cent.

Throughout the year, disposable income rose 3.3 per cent - the highest annual increase since 2001.

This increase was largely due to a rise in wages and salaries of £30.4bn, a rise in net social benefits of £12.4bn and a rise in gross operating surplus and mixed income of £9.1bn, which was partially offset by a rise in taxes on income and wealth of £10.8bn and a fall in net property income of £9.8bn.

And we're saving less too

The household and NPISH saving ratio was 4.2 per cent, compared with 5.4 per cent in 2014 - the lowest level on record. The saving ratio in the last quarter of the year fell to 3.8 per cent from 4.8 per cent, the lowest quarterly figure on record.

UK real household and NPISH disposable income on a quarterly basis is shown below.

Below you can see the components of UK households and NPISH's disposable income.

The ONS said:

The households and NPISH saving ratio has been on a downward trend. The saving ratio fell from 13.5 per cent in quarter one (Jan to Mar) 1997 to 4.5 per cent prior to the onset of the financial crisis in quarter one (Jan to Mar) 2008.

During this period, strong consumer confidence contributed to rising consumption and a sustained period of rising house prices led many households to acquire more debt.

Resultantly, final consumption expenditure and, from 2004, interest payments, comprised a growing proportion of households and NPISH income, leading to a falling saving ratio.