The economy expanded by 0.7 per cent after adjusting for inflation between July and September, the ONS said, compared with a 0.8 per cent initial estimate as it revised down its estimates of the growth of both manufacturing and services industries.
The British Bankers Association, meanwhile, said that its member banks approved 44,105 mortgages in October for purchasing homes, down from 53,997 in September and 37.4 per cent lower than a year earlier.
Both figures will provide a little bit more ammunition for those wanting lower interest rates.
Even though British economic growth was still strong in the third quarter, the main reason for the downward revision was the collection of poorer than expected data from September at the end of the quarter. It suggests the economy was beginning to be affected by the global credit squeeze at the end of September.
Similarly, although the BBA figures cover only about half the mortgage lending in the UK, the steep decline in mortgage approvals suggests activity in the housing market was hit hard by banks wanting to hoard cash rather than extend loans and households fearing it was a bad time to move home.
The potential for the economy to slow sharply in the months to come is shown in the gross domestic product figures. Of the 0.7 per cent economy-wide growth, more than half, 0.4 per cent, came from business services and finance alone, showing just how much Britain has relied on the sectors most vulnerable to the global credit squeeze for economic progress.
These are just the sort of figures that Rachel Lomax, the deputy governor of the Bank of England, was referring to on Thursday evening when she said that the Monetary Policy Committee faced a tricky period” and fouler weather is brewing offshore”.
The detailed figures in the national accounts shows household spending holding up firmly in the third quarter with growth of 1 per cent after inflation compared with the second quarter. Although business investment was flat, stronger government capital spending and investment in housing – both new housing and improvements – pushed total investment 1.6 per cent higher on the quarter.
This strong spending growth was driven mostly by higher incomes – wages and salaries to employees went up 1.4 per cent – but it was not reflected in the overall growth figures as much of household’s new spending went on imported consumer goods. Imports rose 3.9 per cent in the quarter compared with a rise of 2.7 per cent for exports.
In a sign that some inflationary pressure has also dissipated, the annual rate of nominal GDP growth fell from an extremely high rate of 7 per cent in the second quarter to 5.9 per cent in the third quarter.