Consumer spending continues to underpin the economy, according to the Office for National Statistics (ONS), spelling good news for the housing market.
With interest rates at the lowest for 38 years, low unemployment and high house prices, consumers are now more relaxed about spending.
Last year, UK disposable income grew at its fastest for 13 years, according to the ONS, boosted by an increase in earnings. This growth in income meant household spending was up 0.9% in the fourth quarter, with recreation, culture and transport spending being particularly high.
Alex Bannister, group economist for Nationwide Building Society, said: ‘The main story is that the consumer sector remains pretty healthy, with strong income growth and spending and this is keeping the economy afloat. The Government will only worry if it thinks the borrowing is unsustainable ‘ my view is that it isn’t.
‘The problems remain in the corporate sector where firms are not particularly profitable, not confident about investment and exporters finding competition difficult. However, given the bad events of last year, the UK did pretty well and is expected to be one of the fastest growing economies next year.’
High consumer spending did not manage to prevent a halt in economic growth at the end of last year.
Gross domestic product (GDP) was unchanged at the end of last year, but business investment was down for the fourth successive quarter, by 0.3% and manufacturing output fell by 1.9%.
However, the ONS believes the economy has started growing again in the present quarter and that the manufacturing sector has stabilised.