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

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.