UK growth figure out
The first estimate of the UK's GDP figure for the first quarter of this year was released this morning. It shows the UK economy grew +0.5% in the three months to the end of March. That compares with a decline of 0.5% in the previous three months (ie to the end of December). The figure is too high to provide convincing evidence the economy is in trouble but too low to provide convincing evidence the government's plans are on track. On balance, we should be concerned because the growth we saw earlier last year appears to have stalled.
The real concern is that the economy was flat in Q4 2010 without the snow; with the heavy snow the economy contracted. It had been expected that there would be a bounce in the following quarter but that doesn't seem to have happened to any great extent. The net result of course is that growth has been flat over six months. While there are hopeful signs, such as the continued growth of manufacturing, the +0.5% figure is below teh +0.8% forecast by the Office for Budget Responsibility last month. There could be some implications for the fiscal deficit but the OBR's March forecasts pushed growth and deficit reduction a bit more into later years compared to the November report.
Economic confidence has been hit by the government's austerity rhetoric and initial actions. The strategy of talking down the economy always seemed rather odd, at best. From this month, budget cuts will begin to kick in properly. They do not do so in the context of a strong recovery.
Stephen Beer, 27/04/2011
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