Business investment catches up with consumer spending boom

Tim Wallace
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Stronger growth puts more pressure on Mark Carney to hike rates (Source: Getty)
Britain’s recovery is now balanced, official figures showed today and confounding worries that the surge in GDP is based only on household spending splurges.
Business investment shot up by 2.7 per cent in the first quarter of the year, outstripping household spending which rose 0.8 per cent.
Although business investment is a volatile sector, it did rack up impressive growth of 8.7 per cent over the past year.
By contrast household consumption grew by 2.1 per cent.
This chart of gross fixed capital formation – an indicator which includes business investment – shows the volatile index soaring past household consumption.

GDP growth came in at 0.8 per cent in the quarter, with GDP up 3.1 per cent from the first quarter of 2013 to the same period of 2014. Economists say these figures show the economy is unexpectedly strong and balanced.
“Total investment has contributed as much to growth in the past year as consumers (1.2 percentage points vs 1.3 percentage points, respectively),” said Berenberg Bank’s Robert Wood.
“The gradual economic slowdown that the Bank of England is banking on is nowhere to be seen.”

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