Disappointing news about the state of Britain's trading position and further confirmation that squeezed households are driving down their savings have fanned fears about the sustainability of the recovery.
Official data showed the current account deficit – Britain's trade deficit, plus the losses UK plc makes on its overseas ventures – came in at £22.4bn in the fourth quarter of last year, way above forecasts from City economists. Separate data confirmed GDP rose 0.7% in the fourth quarter, as expected.
Economists focused on the current account gap, which was down only slightly from a record deficit of £22.8bn in the third quarter. It was well above a consensus forecast for a £14bn deficit in a Reuters poll. As a percentage of GDP, the deficit was 5.4%, down from 5.6% in the third quarter.
The gap underlined fears about imbalances in the UK economy, said Rob Wood, chief UK economist at German bank Berenberg. "This looks like a domestic recovery and it is quacking like one. Hence the UK's colossal balance of payments deficit is showing no signs of closing," he said.
"The authorities have engineered a recovery, which should be celebrated. It is much better than stagnation. But the UK is storing up big problems for the future."
For 2013 as a whole, the ONS said the UK was a net borrower of £65.7bn, up from £55.4bn in 2012. "This was mainly a result of increased deficits in income and current transfers, partially offset by a decreased deficit in trade," it said, which will be of some comfort to George Osborne as he vows to raise net exports and boost Britain's trade performance.
ONS chief economist Joe Grice underlined the net trade situation in a statement alongside Friday's figures. "As a percentage of GDP, the current account deficits over recent quarters represent some of the largest on record. However, relatively little of this is due to deteriorating net trade. Most of the decline stems from falling income from UK assets overseas, compared with income from foreign-owned assets in the UK," said Grice.
Separate data confirmed economic growth was 0.7% in the fourth quarter. While unchanged from the previous two estimates from the ONS, this release provided more detail on the nature of that growth.
Samuel Tombs, UK economist at the thinktank Capital Economics, said the details painted a mixed picture on rebalancing.
"On a positive note, a bigger proportion of the 0.7% quarterly rise in GDP in the fourth quarter is now thought to have come from net exports. Business investment is also still thought to have grown by 2.4% quarter-on-quarter. But as we feared, the 0.4% quarterly rise in real household spending was funded by households saving less."
Providing more evidence people were having to dip into their savings after years of falling real wages, the ONS said there was a drop in households' saving ratio, which estimates the amount of money households have available to save as a percentage of their total disposable income.
Suggesting that Osborne's bid to turn things around with his "budget for savers" earlier this month will face big challenges, the savings ratio slumped to 5.1% in 2013 from 7.3% in 2012. For the fourth quarter alone the savings ratio dropped to 5% from 5.6% in the third quarter, as households' real disposable income fell 0.1%.
The ONS also revised down its estimate for growth over the whole of 2013 to 1.7% from a previous estimate of 1.8%.
While recent growth and the outlook from many forecasters puts the UK ahead of many other advanced economies in terms of the pace of GDP expansion, comparisons with how it has regained ground since the global financial crisis are less favourable.
Britain's GDP remains 1.4% below the pre-downturn peak. While the government has pushed for a rebalancing towards more manufacturing and exports and less reliance on consumer spending, the shape of the recovery so far suggests little progress.
The ONS said on Friday that the dominant service sector had surpassed its pre-crisis peak in the autumn of last year. However, the production industries remain 12.1% below their pre-downturn peak, with manufacturing 8.9% lower. Similarly, construction remains 12.5% below the peak.
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