UK economy grows 0.2pc in Q1
The UK economy grew half as much as economists forecast in the first quarter as winter weather hampered expansion, underscoring the recovery’s fragility two weeks before the election.
Gross domestic product rose 0.2pc from the final three months of 2009, when a 0.4pc expansion ended the recession, the Office for National Statistics said today in London.
The median forecast in a Bloomberg News survey of 32 economists was for a 0.4pc increase.
Prime Minister Gordon Brown said in a televised debate last night that the economy continues to need stimulus and that Conservative leader David Cameron’s plans to cut spending this year are a “risk” to growth.
The winner of the May 6 vote will need to tackle a budget shortfall that swelled to the worst since World War II in the fiscal year through March.
“I’m not sure a weak number plays into any party’s hands very clearly,” George Buckley, chief UK economist at Deutsche Bank AG in London, said before the report.
“For the incumbents it may support their platform for postponing spending cuts, while the Conservatives say it’s a symptom of what the Government’s policies have caused.”
The pound erased its gain against the dollar after the report and was down 0.2pc to $1.5353 as of 9:32am in London. It was at $1.5397 shortly before the data were published.
From a year earlier, the economy contracted 0.3pc in the first quarter. Economists forecast a 0.1pc decline, according to the median of 28 projections in a Bloomberg News survey.
Today’s report is the first of three estimates for the quarter. It uses data for the first two months of the period from about 40pc of companies assessed, or about 40,000 businesses, and three-month figures for a further 20,000 firms.
Chancellor of the Exchequer Alistair Darling said on April 13 the statistics office has “three cuts” at the data and people should look at longer-term economic trends.
The UK is the first of the Group of Seven nations to report first-quarter GDP. The economy faced headwinds from coldest winter since 1979 that snarled traffic, slowed construction and kept shoppers home, and a government increase in sales tax.
The cold snap restrained manufacturing and retail sales, the statistics office said.
Industrial production, which accounts for 17pc of the economy, rose 0.7pc on the quarter, while services, which make up 76pc of GDP, increased 0.2pc. Construction slumped 0.7pc.
The International Monetary Fund this week cut its 2011 UK GDP forecast to 2.5pc from 2.7pc and held its prediction for expansion this year at 1.3pc as domestic demand “remains subdued.”