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Consumers, investment lead UK to ninth quarter of growth
[LONDON] Consumer spending and investment helped the UK economy to its longest stretch of growth since the financial crisis. Net trade acted as a drag.
Gross domestic product rose 0.3 per cent in the first quarter, matching an initial estimate, the Office for National Statistics said in London on Thursday. It was less than the 0.4 per cent increase forecast by economists.
While the economy has expanded for nine straight quarters - the longest sprint since 2008 - there is little sign of the shift away from consumer spending promised by David Cameron five years ago. The prime minister has pledged to use his surprise election victory this month to boost productivity.
"It confirms the picture of somewhat weaker growth in the first quarter than in recent ones," said ONS Chief Economist Joe Grice. "But no single quarter's figures should be given undue weight." Consumer spending rose 0.5 per cent on the quarter and investment grew 1.7 per cent. Exports fell 0.3 per cent and imports rose 2.3 per cent. As a result, net trade knocked 0.9 percentage points off growth, the most since the third quarter of 2013.
The figures are the first revision of GDP after Cameron took office with a Conservative majority in Parliament. A downward revision to services growth to 0.4 per cent from 0.5 per cent offset upward revisions to construction and industrial production.
Consumer spending is being underpinned by zero inflation and rising wages. The increase in business investment followed a contraction at the end of last year. GDP expanded an unrevised 2.4 per cent from a year earlier.
While the Bank is expected to maintain rates at a record- low after it meets next week, earlier rate rises could be back on the agenda for several monetary policy committee members if post-election certainty leads to strengthening in economic activity, economists say.
A key challenge for Mr Cameron's government is to increase productivity, as output per hour remains below its pre-crisis levels. The Bank of England expects slack in the economy to be used up within a year, leading economists to predict officials will raise the benchmark rate from a record-low 0.5 per cent early next year.
The US will publish its second estimate for first-quarter GDP on Friday. Economists forecast that the annualized change will be revised to a 0.8 per cent drop from a 0.2 percent increase. Based on the same measure, the UK grew 1.2 per cent in the three months through March, the ONS said.