LONDON: Foreign trade put the biggest drag on record on British economic growth last quarter, as a weakening global economy and surging demand for imports slowed Britain’s recovery from the financial crisis, data showed on Friday.

The economy grew 0.5 per cent in the third quarter, the Office for National Statistics said, confirming a preliminary reading and slowing from 0.7 per cent growth between April and June.

The slowdown reflects a global weakening led by emerging markets such as China, while exporters have struggled with the rise in sterling this year.

But the data was in line with a forecast in a Reuters poll, and sterling edged up against the euro and dollar on the day, reducing some of its earlier losses.

Consumer spending remained strong. But trade lopped 1.5 percentage points off the economic expansion from July to September. That marked the biggest quarterly drag on gross domestic product growth since records began in 1997 and a sharp turnaround from the second quarter when trade boosted GDP.

Imports surged by the most in nearly 10 years, up 5.5 per cent from the second quarter and overshadowing a much weaker rise in exports.

Overall the economy grew 2.3 per cent compared with the same period a year ago, down from 2.4 per cent in the second quarter and lower than 2.9 per cent growth for all of 2014, when Britain outpaced all other major advanced economies.

Scott Bowman, an economist with Capital Economics, said he expected the slowdown to be temporary despite the obstacles posed by Britain’s planned referendum on its membership of the European Union and the government’s squeeze on public spending.

Finance minister George Osborne on Wednesday spelt out tough spending cuts for several government departments, although they were not as severe as some had expected.

Despite concerns about the global economy, business investment rose 2.2 per cent in the three months to September and was up 6.6 per cent on the year, figures likely to be welcomed by policymakers who want to see a more balanced recovery.

Keep on spending

Britain has relied on consumers to drive much of its growth since 2013 and consumer spending remained strong, growing 0.8 per cent for the third consecutive quarter. It was up 3.1 per cent from a year earlier, matching the fastest growth rate since late 2007, before the financial crisis.

Households have benefited this year from a pickup in wages while inflation has hovered around zero and interest rates remain at a record low.

The Bank of England, which is considering when to start raising interest rates, has said it expects GDP growth in the third quarter to be revised up to 0.6 per cent. It is forecasting 2015 growth of 2.7 per cent.

That might prove optimistic, based on the latest data and Britain’s official growth forecasts which were confirmed this week at 2.4 per cent for 2015.

Services output, the largest part of the economy, rose by 0.7 per cent on the quarter, unchanged from the initial reading.

Industrial production edged up 0.2 per cent but manufacturing output fell 0.4 per cent in the quarter, its third consecutive quarterly decline, accentuating the unbalanced nature of the recovery.

Two surveys earlier on Friday also showed the dip in the economic mood as consumer morale slipped to its lowest level in six months in November and growth among services companies cooled.

Growth in house prices slowed too, mortgage lender Nationwide said.