GDP growth in the first quarter was up by 0.5% compared to the final quarter of 2010 and up by 1.8% compared to a year ago. The preliminary estimate is in line with consensus forecasts. Ed Balls, Shadow Chancellor, said: “These figures show an economy that has flatlined since the autumn.” On the other hand, the Chancellor and the Prime Minister are able to claim both the 0.5% and the 1.8% year on year growth represent a positive growth out turn.
Manufacturing grew year on year by just under 5% and construction despite the down turn in the quarterly figure was up by 3.4%. Distribution, hotels and restaurants increased by 1.5% year on year, transport, storage and communications were up by 1.5% as were business services and finance. Government and other services increased by 1.4%.
It is unlikely the figures will change views on the monetary policy committee and an interest rate rise, which at one stage could have taken place as early as May is now likely to feature in early Autumn.
For the year as a whole, the consensus forecast is for growth of around 1.7%. Assuming the economy grows quarter on quarter in Q2 by a further 0.5%, the rate of change year on year would fall to 1.2%. This would be a worrying development and signal a slow down which may be difficult to reverse without a plan B for the Chancellor. It is growth and evidence of life but not as we need it for this stage in the recovery.
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The views expressed are my own and in no way reflect pro.manchester policy. In no way should the comments be considered as investment advice or guidelines or reflect political bias. UK Economics news and analysis : no politics, no dogma, no polemics, just facts. JKA is a visiting professor at MMU Business School, an economist and specialist in Corporate Strategy, educated at LSE, London Business School with a PhD from Manchester Metropolitan University.