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Economy grows faster than expected in line with revised first quarter forecast UK economy grows faster than first forecast
(35 minutes later)
Britain’s economy grew faster than was initially thought in the opening months of this year but still suffered a marked slowdown compared to the end of 2014. Britain’s economy grew faster than initially thought in the opening months of this year but still suffered a marked slowdown compared to the end of 2014.
The Office for National Statistics said that GDP rose 0.4% in the first quarter from the previous three months. That was as City economists had forecast after a recent revision to official construction figures showed the sector did not suffer the sharp drop first pencilled in. The Office for National Statistics said GDP rose 0.4% in the first quarter from the previous three months. That was in line with City economist forecasts after a recent revision to official construction figures showed the sector did not suffer the sharp drop first pencilled in.
The latest growth rate was half the 0.8% seen in the final quarter of last year, also revised up from a previous estimate of 0.6%. The latest growth rate was half the 0.8% recorded in the final quarter of last year, also revised up from a previous estimate of 0.6%.
Analysts said the slowdown in the first quarter would likely prove temporary and highlighted an overall picture of stronger growth, with 2014 as a whole enjoying a 3% rise in GDP – the strongest growth since 2006, before the global financial crisis.Analysts said the slowdown in the first quarter would likely prove temporary and highlighted an overall picture of stronger growth, with 2014 as a whole enjoying a 3% rise in GDP – the strongest growth since 2006, before the global financial crisis.
“The economic fundaments look broadly positive for the UK, particularly for the consumer, and we believe growth will be largely healthy through the second half of 2015,” said Howard Archer, economist at IHS Global Insight, forecasting 0.7% growth in the second quarter.“The economic fundaments look broadly positive for the UK, particularly for the consumer, and we believe growth will be largely healthy through the second half of 2015,” said Howard Archer, economist at IHS Global Insight, forecasting 0.7% growth in the second quarter.
He added: “Consumers’ purchasing power should see marked improvement due to extremely low consumer price inflation and strengthening earnings growth, while employment should see decent growth. Furthermore, it currently looks unlikely that interest rates will rise before 2016.”He added: “Consumers’ purchasing power should see marked improvement due to extremely low consumer price inflation and strengthening earnings growth, while employment should see decent growth. Furthermore, it currently looks unlikely that interest rates will rise before 2016.”
The chancellor, George Osborne, who gives his first budget of the new parliament next week, welcomed the latest growth figures. “Today’s figures are another reminder that the economic plan we’ve pursued in Britain these last five years has increased our resilience – and we will take whatever further steps are needed to protect the UK from the new risks we see to our economic security,” he said in a a statement.The chancellor, George Osborne, who gives his first budget of the new parliament next week, welcomed the latest growth figures. “Today’s figures are another reminder that the economic plan we’ve pursued in Britain these last five years has increased our resilience – and we will take whatever further steps are needed to protect the UK from the new risks we see to our economic security,” he said in a a statement.
.@ONS has released its final estimate of UK #GDP for the first quarter. Read the Chancellor’s statement: pic.twitter.com/PwhkXeaw3A.@ONS has released its final estimate of UK #GDP for the first quarter. Read the Chancellor’s statement: pic.twitter.com/PwhkXeaw3A
Household spending remained the biggest engine of growth in the first quarter as consumers appeared to dip into their savings, while net trade acted as a drag. That echoes signs of caution among exporters in recent business surveys as they struggle with a stronger pound, which makes UK goods more expensive to overseas buyers.Household spending remained the biggest engine of growth in the first quarter as consumers appeared to dip into their savings, while net trade acted as a drag. That echoes signs of caution among exporters in recent business surveys as they struggle with a stronger pound, which makes UK goods more expensive to overseas buyers.
Scott Corfe, of the thinktank Centre for Economics and Business Research, was among the analysts pointing to several clouds on the horizon, including the threat of a Greek exit from the eurozone as the country grapples with looming debt repayment deadlines. Scott Corfe, of the thinktank Centre for Economics and Business Research, was among the analysts pointing to several clouds on the horizon, including the threat of a Greek exit from the eurozone as the country grapples with debt repayment deadlines.
“While the upward revisions to growth last year and in the first quarter of 2015 paint a more positive picture of the UK economy, we shouldn’t ignore the challenges ahead beyond this year, particularly if the global economy hits a significant stumbling block,” he said.“While the upward revisions to growth last year and in the first quarter of 2015 paint a more positive picture of the UK economy, we shouldn’t ignore the challenges ahead beyond this year, particularly if the global economy hits a significant stumbling block,” he said.
“This is not improbable given the prospect of Grexit and ongoing geopolitical crises in Russia, the Middle East and elsewhere. The elephant in the room is that policymakers will be unable to do very much in the event of another downturn – interest rates are at the lower bound, further benefits from quantitative easing are questionable and fiscal positions across much of the developed world remain poor.”“This is not improbable given the prospect of Grexit and ongoing geopolitical crises in Russia, the Middle East and elsewhere. The elephant in the room is that policymakers will be unable to do very much in the event of another downturn – interest rates are at the lower bound, further benefits from quantitative easing are questionable and fiscal positions across much of the developed world remain poor.”
The ONS also released figures on living standards, which showed a slowly improving picture but with still some way to go to return to the levels enjoyed before the downturn.The ONS also released figures on living standards, which showed a slowly improving picture but with still some way to go to return to the levels enjoyed before the downturn.
The ONS said GDP per head continued to grow in the first quarter but at a slower pace, rising 0.2% compared with a 0.7% increase in the previous quarter. It remains 0.6% below the pre-downturn peak.The ONS said GDP per head continued to grow in the first quarter but at a slower pace, rising 0.2% compared with a 0.7% increase in the previous quarter. It remains 0.6% below the pre-downturn peak.
Real household disposable income per head was unchanged from the previous quarter but up 3.7% on a year ago and was 2.5% above its pre-downturn level, the ONS said in separate figures on economic wellbeing.Real household disposable income per head was unchanged from the previous quarter but up 3.7% on a year ago and was 2.5% above its pre-downturn level, the ONS said in separate figures on economic wellbeing.
The figures follow news from the ONS on Monday that British households are still £500 a year worse off than before the financial crisis in 2008.The figures follow news from the ONS on Monday that British households are still £500 a year worse off than before the financial crisis in 2008.
The UK’s trading position was also cause for concern, economists said. Figures alongside the GDP data on the UK’s current account deficit – made up of the trade deficit, plus losses on overseas ventures – came in worse than expected.The UK’s trading position was also cause for concern, economists said. Figures alongside the GDP data on the UK’s current account deficit – made up of the trade deficit, plus losses on overseas ventures – came in worse than expected.
The current account deficit fell to £26.5bn from an upwardly revised £28.9bn, but was bigger than the £23.8bn forecast in a Reuters poll of economists. It was equivalent to 5.8% of GDP, down from 6.4% in the fourth quarter of 2014. For 2014 as a whole, the deficit was 5.9% of GDP, the highest since records began in 1948.The current account deficit fell to £26.5bn from an upwardly revised £28.9bn, but was bigger than the £23.8bn forecast in a Reuters poll of economists. It was equivalent to 5.8% of GDP, down from 6.4% in the fourth quarter of 2014. For 2014 as a whole, the deficit was 5.9% of GDP, the highest since records began in 1948.