Osborne buoyed by new GDP figures

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Published: Tuesday 31st March 2015 by The News Editor

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The UK economy grew more strongly than previously thought last year according to revised official figures showing gross domestic product (GDP) rose by 2.8%.

GDP had previously been estimated to have increased by 2.6% in 2014.

Figures from the Office for National Statistics (ONS) showed growth in the fourth quarter was 0.6%, up from a previous estimate of 0.5%.

Chancellor George Osborne hailed the figures, writing on Twitter: “GDP revised upwards from 2.6% to 2.8% for 2014. Confirms UK as clearly fastest growing major advanced economy.”

The figures also showed that GDP per head in 2014 rose by 2.2%.

It is seen as a key measure because it indicates that the size of the economy per person is growing even as the population expands.

GDP per head remains 1.2% below levels before the economic downturn.

Real-terms household disposable income per head increased by just 0.1% during 2014. It is now 2.2% above its pre-economic downturn level.

ONS data also showed household spending grew by 0.6%, or £1.6 billion, in the fourth quarter.

Mr Osborne wrote on Twitter: “Hat trick of good news just out from ONS: GDP revised up, consumer confidence up, living standards up. Long-term economic plan working.”

The figures showed a slump in business investment of 0.9% in the fourth quarter of last year, but this was not as bad as a previous estimate of 1.4%.

Meanwhile, the UK’s current account deficit for 2014 widened to £97.9 billion, from £76.7 billion in 2013.

It now equates to 5.5% of GDP, the largest in percentage terms since annual records began in 1948, the ONS said.

The growing current account deficit was mainly due to UK earnings on investment abroad decreasing and foreign earnings on investment in the UK increasing, though the deficit in trade in goods and services narrowed slightly.

Vicky Redwood, chief UK economist at consultancy Capital Economics, said the figures “leave the economic recovery at the end of last year looking a bit stronger than before, although the large current account deficit casts something of a cloud”.

Howard Archer, chief UK and European economist at IHS Global Insight, said the current account deficit, though it narrowed on a quarterly basis at the end of 2014, was still “far too high for comfort”.

But he added: “Upwardly-revised growth in 2014 will be welcomed by the Conservatives and the Liberal Democrats, who will be fervently hoping that they get a late boost in May’s general election from voters marking them highly on the economy’s recent performance.

“Latest news suggests overall that the economy is holding up pretty well so far in 2015, and we expect GDP growth to come in again at 0.6% quarter on quarter in the first quarter.

“However, any prolonged political uncertainty following May’s general election would be liable to at least temporarily weigh down on growth, particularly through leading to increased business caution over investment.”

David Kern, chief economist at the British Chambers of Commerce, said: “While the upgrade in growth is positive, some of the details are concerning and highlight the need to shift our economy towards a more sustainable model.

“As in recent quarters, services and consumer spending were the main drivers of the economy. But while a healthy consumer sector is vital to the UK economy, it is clear we need a greater contribution from exports and investment.

“It is therefore concerning that business investment fell last quarter and the current account deficit remains unacceptably large, despite slight improvements in the trade balance.

“The next government must do more to back long-term business investment and support British exporters.”

Published: Tuesday 31st March 2015 by The News Editor

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