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| UK economy grows faster than first forecast | UK economy grows faster than first forecast |
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| 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. | 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 GDP rose 0.4% in the first quarter from the previous three months. That was in line with City economists’ forecasts 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 economists’ 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% recorded 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 probably prove temporary and the overall picture was of stronger growth. The growth figure for last year was now 3% – the strongest since 2006, before the global financial crisis. | Analysts said the slowdown in the first quarter would probably prove temporary and the overall picture was of stronger growth. The growth figure for last year was now 3% – the strongest since 2006, before the global financial crisis. |
| “The economic fundamentals 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 fundamentals 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. | 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. |
| .@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 main engine of growth in the first quarter with consumers appearing to dip into their savings, while net trade acted as a drag. Exporters have cautioned in recent business surveys that they were struggling with the stronger pound making UK goods more expensive to overseas buyers. | Household spending remained the main engine of growth in the first quarter with consumers appearing to dip into their savings, while net trade acted as a drag. Exporters have cautioned in recent business surveys that they were struggling with the stronger pound making UK goods more expensive to overseas buyers. |
| Scott Corfe at the Centre for Economics and Business Research thinktank was among the analysts pointing to several clouds on the horizon, including the threat of the Greek crisis precipitating the country out of the euro. | Scott Corfe at the Centre for Economics and Business Research thinktank was among the analysts pointing to several clouds on the horizon, including the threat of the Greek crisis precipitating the country out of the euro. |
| “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.” | “This is not improbable given the prospect of Grexit and ongoing geopolitical crises in Russia, the Middle East and elsewhere.” |
| He warned that with borrowing rates already at rock bottom and government debt high, there was limited scope for cushioning any shocks. | He warned that with borrowing rates already at rock bottom and government debt high, there was limited scope for cushioning any shocks. |
| “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 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. |
| 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. |
| The British Chambers of Commerce said Britain’s wide current account gap was as big a risk to the UK’s economic outlook as the eurozone crisis and it criticised ministers for failing to bring the margin down. | |
| “The size and persistence of the UK’s current account deficit make us hugely vulnerable to external shocks, unexpected shifts in market sentiment and unwelcome downgrades to our credit rating,” said John Longworth, the lobby group’s director general. | “The size and persistence of the UK’s current account deficit make us hugely vulnerable to external shocks, unexpected shifts in market sentiment and unwelcome downgrades to our credit rating,” said John Longworth, the lobby group’s director general. |
| “While it is good to see some improvement over the quarter, the huge current account deficit should be setting off alarm bells. Recent improvements mask long-term falls in net investment and overseas income, as well as our lacklustre export performance. These issues merit immediate and sustained attention, both in Westminster and in boardrooms across Britain.” | “While it is good to see some improvement over the quarter, the huge current account deficit should be setting off alarm bells. Recent improvements mask long-term falls in net investment and overseas income, as well as our lacklustre export performance. These issues merit immediate and sustained attention, both in Westminster and in boardrooms across Britain.” |