Real business investment grew 1.4 per cent in the third quarter, prompting many City economists such as Howard Archer of IHS Global Insight to welcome the fact that “business investment is finally kicking in”. If so, that is hugely important to the UK economic debate. Investment growth will enable the recovery to rebalance away from squeezed households who cannot easily borrow more and more to support spending for a lot longer, exporters whose prospects depend to a large extent on the still-troubled eurozone, and the government which will continue its austerity drive.
The following five charts about business investment should make you pause for thought and raise quite a few questions about data reliability as highlighted by the Bank of England governor on Tuesday.
Investment in buildings, plant and machinery did not drive Q3 growth
Far from investment being important to the 0.8 per cent real growth and 1.7 per cent nominal growth in the third quarter, this chart shows that the good growth figures were almost entirely generated by household consumption and a build-up of unsold stocks within companies. Investment contributed only 0.1 percentage points to the 0.8 per cent growth. Read more