29/04/2014
Chancellor George Osborne says the GDP figures confirm that the economic recovery is well under way
Britain's economy picked up pace in the first quarter of this year but not quite as fast as economists had been expecting.
The Office for National Statistics said on Tuesday that GDP expanded by 0.8% in the first quarter after 0.7% growth in the final three months of last year. That was below economists' forecast of 0.9%, according to the consensus in a Reuters poll.
The year-on-year growth rate was 3.1%, the fastest in six years, but again below forecasts for 3.2% growth. The economy is still smaller than it was before the recession hit in 2008 but analysts said it was now on track to make up all the lost ground by the middle of this year.
"Today's GDP numbers were a little disappointing, though we would not be surprised to see it revised higher," said John Bulford at the thinktank Oxford Economics. "There is still plenty of good news to take away from today's numbers, and we are sticking to our view that the economy will expand by 3% in 2014 as a whole, with GDP overtaking its pre-crisis peak in the next quarter."
Although there were signs the recovery was broadening, with even the battered construction sector returning to growth in the first quarter, the ONS said the UK economy still remains 0.6% below its pre-crisis peak. Without the drag from a shrinking oil and gas sector the economy was 0.3% bigger than that pre-crisis peak, statisticians added.
George Osborne seized on the figures as confirmation that the recovery was well under way.
"Today's figures show that Britain is coming back – but we can't take that for granted. We have to carry on working through our long term economic plan," said the chancellor. "The impact of the great recession is still being felt, but the foundations for a broad based recovery are now in place."
The breakdown of the data showed growth in all of Britain's main sectors in the first quarter.
The dominant services sector grew by 0.9% on the quarter, while the construction sector expanded by 0.3%, rebounding from a 0.2% fall in the previous three months. British manufacturing increased by 1.3%, with industrial production overall up by 0.8%.
Howard Archer, chief UK economist at IHS Global Insight, said: "Encouragingly, growth was broad based in the first quarter with all sectors contributing led by the dominant services sector. Although the preliminary estimate of GDP in the first quarter is based on the output side of the economy, it is worth noting that consumer spending likely grew at a decent rate."
The first estimate of GDP from the ONS is based on less than half the data used to produce the final estimate, and gives no detail on the spending side of the economy.
Commenting on the breakdown of the numbers, the chief economist at the ONS, Joe Grice, said: "Overall, the economy is now only 0.6% below the pre-recession peak at the beginning of 2008. In fact, services are now 2% above the pre-recession peak but the production and construction sectors are still around 12% lower."
The weaker-than-expected figures were widely taken as easing pressure on the Bank of England to raise interest rates as the recovery gathers steam. With inflation now at 1.6%, well below the Bank's government-set target of 2%, policymakers could leave borrowing costs at their record low of 0.5% for some time yet, many economists said.
"The UK economy is currently in a sweet spot of solid but not runaway expansion with little in the way of visible price pressures. For that reason there does not seem to be much of a case for the monetary policy committee to push official interest rates up this year, and indeed we continue to suspect that the idea of a tightening can be shelved until after the general election in May next year," said Philip Shaw, an economist at Investec in London.
But some disagreed. James Knightley, of ING bank, forecast the economy will grow by 3% this year, putting it ahead of most developed countries.
"We only really see New Zealand as the developed market economy that can probably beat that this year. Given New Zealand has already started to tighten monetary policy, this underlines our point that the risks remain skewed towards earlier Bank of England policy tightening than the second quarter of 2015 point currently pencilled in by financial markets," he said.
Despite faster headline growth and a drop in the unemployment rate, trade unions have warned that the recovery is not being widely felt.
Reacting to the GDP data, Frances O'Grady, the general secretary of the TUC, warned that the economy was not yet strong enough to withstand higher interest rates.
"However welcome these figures are, the economy remains below its 2008 peak and most people have yet to see much benefit from growth. Pay and job prospects are still below pre-crash levels, and there will need to be many more years of figures like today's before ordinary families recover lost ground," she said.
Ian McCafferty, a member of the Bank of England's monetary policy committee, warned that although the time was not yet right for a rise in interest rates, the MPC must not run the risk of waiting too long to increase the rate. If it did, raising the rate at the gradual pace desired would not be possible.
"A gradual trajectory for rates can be ensured only if the first rate rise is not held back, such that we start the normalisation process before the economy reaches effective capacity constraints, so that inflation expectations and pressures are kept well in check," he said.
In comments made in a speech earlier this month but published on Tuesday, McCafferty said that as UK wage growth begins to pick up, the committee must keep "a close eye" on pay pressures.
Fonte: theguardian.com
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