UK economy returns to growth
THE UK economy has rebounded from the surprise contraction at the end of 2010, according to new figures.
The Office for National Statistics said GDP in the first quarter of 2011 grew by 0.5%.
The latest figure follows the shock 0.5% contraction in the economy in the final quarter of last year.
Weather was partly blamed for that setback although the ONS said that growth in the economy would have been broadly flat even allowing for snow-related disruption.
The ONS said that overall GDP had now returned to the level of the third quarter of 2010 and increased 1.8% in the first quarter of 2011 compared to the same period last year.
In the first three months of 2011 production output grew 0.4% while services also grew 0.9% although the construction sector fell 4.7%.
Business services and finance and transport and storage and communication were the sectors making the biggest contribution to growth in the last quarter.
John Cridland, CBI director-general, said: “We are seeing a modest rebound in economic growth, recouping the loss in output caused by the bad weather in the fourth quarter of last year. Growth of 0.5% in the first quarter is in line with our expectations and, while encouraging, it does reaffirm our view that the recovery remains slow and sluggish.
“The main reason the growth figures were not stronger is the contraction in construction, with the overhang into January from the bad weather. February’s construction figures show some recovery.”
Attention will now turn to the Bank of England’s Monetary Policy Committee which may feel confident in raising interest rates if enough members decide the economic recovery is now more firmly established.
Analysts had widely forecast an interest rate rise next month but opinion sharply changed in the wake of figures which showed that CPI inflation had fallen to 4% in March despite the lack of action from the MPC.
David Kern, chief economist at the British Chambers of Commerce, said: “Given the fragility of the recovery, it is vital for the Government to persevere with policies that support growth, and remove the obstacles that prevent businesses from creating jobs and exporting.
“For the MPC, these figures reinforce the case for postponing increases in interest rates until much later in the year. It is crucial to avoid any measures that could derail the recovery.”
