Economic recovery back in focus

Published: Tuesday 28th April 2015 by The News Editor

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The pace of Britain’s economic recovery will come into focus today with official figures expected to reveal that it slowed in the first three months of this year.

Official figures on GDP will come nine days ahead of the General Election and are likely to be seized on by politicians as they vie over which of them is the most competent to manage the economy.

GDP rose by 0.6% in the fourth quarter of last year but economists expect this to have slowed to around 0.5% for the first quarter.

Data last month from the Office for National Statistics (ONS) shows that the economy expanded by 2.8% last year, its fastest pace since 2006, and the strongest rate among the G7 major advanced economies in 2014.

Growth is expected to be further supported this year by the plunge in the global oil price, which has helped push inflation down to zero, meaning households’ wage packets will go further and should boost consumer spending.

But so far figures have suggested a dismal start to 2015 for much of the economy. A new CBI survey showed the manufacturing sector recovering but still held back by sluggish export orders.

Official data so far this year has shown industrial production had a flat first couple of months while construction contracted in both January and February.

The services sector, representing more than three quarters of output, also shrank in January while goods exports tumbled to a four-and-a-half-year low in February as the UK’s trade deficit widened. Last week, figures showed a surprise decline in retail sales in March.

However, minutes from the latest meeting of the Bank of England’s rate-setting Monetary Policy Committee (MPC) noted that some of the data was “volatile and susceptible to revision”.

They pointed to more upbeat readings from some unofficial surveys. These have indicated growth ticking up to 0.7% for the first quarter.

Scotiabank’s Alan Clarke said he was pessimistic on growth, expecting it to decelerate to 0.4% for the first quarter, adding that he “wouldn’t rule out an even lower number”. But he said the second quarter should be much stronger.

Vicky Redwood of Capital Economics said: “The first estimate of GDP seems likely to show that the recovery slowed in Q1 and may therefore put the coalition parties on the back foot just nine days before the General Election.

“Nonetheless, we doubt that the recovery is on the cusp of a slowdown. Households’ incomes are on track for their strongest growth since 2006 this year.

“Meanwhile, borrowing costs are falling and monetary stimulus appears to have revived the eurozone economy.”

Published: Tuesday 28th April 2015 by The News Editor

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