Spending by UK households slowed to its lowest level in almost six years during 2017 as the impact of higher inflation hit living standards.
The Office for National Statistics said spending in the third quarter was up by 1% on the same period in 2016 – the weakest annual growth since the first three months of 2012.
In its latest update on the state of the economy, the ONS reported growth of 0.4% in the third quarter – unchanged on its previous estimates but slightly higher than the 0.3% recorded in each of the first two quarters.
Revisions to previous data meant, however, that annual growth in the year to the third quarter has been adjusted up from 1.5% to 1.7%.
Household spending increased 0.5% between the second and third quarters but was boosted by consumers running down their savings during a period when real incomes were squeezed by price rises running ahead of pay.
Paul Hollingsworth, a UK analyst at Capital Economics, said the ONS figures revealed a more balanced growth picture, with household spending revised down but business investment revised up from 0.2% to 0.5%.
“The economy looks to have maintained this pace in Q4,” Hollingsworth added. “This should mean that GDP growth for 2017 as a whole should come in at about 1.8%.”
The ONS’s head of national accounts, Darren Morgan, said: “Today’s unrevised third quarter figures show most of the growth came from the dominant service sector, with accounting, recruitment agencies and retailing all performing well.
“Manufacturing also boosted growth thanks to an increase in exports and the introduction of new car models. Meanwhile, household spending and business investment both grew steadily.”
Britain’s balance of payments deficit with the rest of the world narrowed from 5.1% of GDP in the second quarter to 4.5% in the third quarter. The improvement was mainly due to UK investors securing higher returns on their overseas holdings than overseas investors made on their holdings in Britain.