Investments  

Average income 6% down on pre-crisis levels

Fresh economic data has left unrevised the estimate for UK economic growth the third quarter of the year and confirmed a seventh successive quarter of growth, but revealed average net income has remained flat for two years and is close to 6 per cent down on the pre-crisis level.

Third quarter gross domestic product per head increased 0.6 per cent compared to the second quarter, in line with previously published estimates, but remains 1.8 per cent below pre-economic downturn levels, according to latest Office for National Statistics data.

The latest statistical bulletin showed that GDP in volume terms was unrevised from the previous estimate, up by 0.7 per cent in the third quarter. Year-on-year, third quarter GDP in volume terms increased by 2.6 per cent, revised down 0.4 per cent after a slew of revisions to previous quarters.

Article continues after advert

GDP in current prices was estimated to have increased by 1.3 per cent between the second and third quarters this year. It has now seen seven consecutive quarter-on-quarter increases and is 2.9 percentage points above the level seen in Q1 2008 prior to the economic downturn.

However, in a boost for opposition claims over the lack of benefit being felt by ordinary people from the economic recovery, ONS said net disposable income per head, which represents income for UK residents, has stayed broadly flat since Q1 2012 and remains 5.6 per cent below pre-downturn levels.

Compensation of employees - which comprises all wages and remuneration - grew 1.4 per cent in Q3 2014, which is down 0.4 percentage points since Q2. The government can at least claim wages are outstripping inflation, though, thanks to a recent oil price-inspired tumble in the latter.

Output saw positive growth in all four main industrial groupings: up 0.5 per cent in agriculture, forestry and fishing; 0.2 per cent in total production; 1.6 per cent in construction; and 0.8 per cent in total services.

Both total production and total services estimates were unrevised from the second estimate of GDP. Agriculture and construction were both revised upwards, by 0.2 and 0.8 percentage points respectively in Q3 2014.

Total domestic expenditure rose by 1 per cent in the third quarter, with household spending - adjusted for inflation - grew by 0.9 per cent, or £2.5bn. Meanwhile, the household saving ratio was estimated to be 7 per cent in Q3.

The main contribution to growth can be seen in ‘transport’, which has increased by 2.9 per cent compared with the second quarter this year. The largest negative contribution to growth can be seen in ‘miscellaneous goods and services’, down by 0.5 per cent compared with Q2.

Household spending in volume terms has now increased to £261.6bn, up from a previous peak of £259bn in Q4 2007, before it fell to £244.1 billion in Q2 2009.

peter.walker@ft.com