UK economic growth still sluggish
Stronger industrial production in the first quarter helped to nudge GDP growth up to 0.3% although the economic picture remains lacklustre.
Today’s upward revision of 0.1% will nevertheless provide a small boost to the new Coalition government, which faces the daunting task of toning up the UK’s finances.
Howard Archer, chief UK economist at IHS Global Insight said of the figures: “This in itself is not overly worrying as overall growth in the first quarter was clearly dragged down appreciably by the very bad weather in January, and most indicators suggest that the recovery has firmed to a limited extent since then.”
This figure could yet rise further if services growth, which was left unchanged at 0.2% following bad winter weather, moves higher - as has been the case in previous quarters.
However, Archer pointed out that net trade was “very disappointingly negative” for a third successive quarter and sliced 0.4 of a percentage point off first quarter GDP growth as imports rose by 1.4% quarter-on-quarter but exports were flat despite the weakened pound.
Economists warn that growth is now likely to remain subdued with high unemployment and looming fiscal tightening likely to weigh on consumer spending while the the Eurozone crisis threatens to dampen UK growth by limiting exports and knocking confidence.
Jonathan Loynes, chief European economist, says: “Overall, a pretty weak picture. With household spending flat, growth was therefore driven by government spending, inventories and investment. The first two won’t last much longer.
“We continue to expect growth of just 1% or so in 2010 overall, picking up only slightly to 1.5% in 2011.”
Mark Bolsom, head of the UK Trading Desk at Travelex Global Business Payments, adds: “With a daunting level of national debt, rising inflation and low interest rates, I don’t think the economy will grow much past 1% this year.
"The real crux of whether we’re going to carry on growing depends on the extent to which the forthcoming austerity measures contract the economy. UK economic growth will be determined by events on the 22 June.”
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).