Economic recovery is set to slow

The latest data suggest the economic recoveryis losing momentum. The pound hit a nine-month low against the dollar as it emerged that the PMI index of activity in the services sector, which makes up around 75% of the economy, edged down in December. A sub-index covering business expectations fell to a three-year low. The PMI covering manufacturing declined to a three-month low in December. Meanwhile, household borrowing in November posted the largest monthly increase since before the crisis, a rise of £5.3bn. It is now rising at an annual pace of 3.2%.

What the commentators said

Growth probably came in at around 2.2% in 2015, according to Markit's Chris Williamson, but 2016 could be tougher. The fall in business expectations suggests firms are "becoming more cautious in the face of growing uncertainties", notably the cost of the living wage, government spending cuts, global growth jitters and the potential ramifications of Brexit.

The bigger picture, meanwhile, is that for all the talk of rebalancing the economy towards business investment and export-led growth, "this recovery, like others, will remain consumer-led", said Andrew Smith of the Industry Forum. Still, it's far too soon to panic about a private debt bubble bursting as it did in 2008. Measured as a proportion of disposable income, household debt has ticked up to 143% of disposable income, down from 165% before the crisis.

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Nevertheless, firing on just the one usual cylinder does leave the economy looking exposed when interest rates finally rise and consumption slows.