Revised GDP figures show UK economy stagnating
The revised GDP growth figures from the first quarter of 2011 were released by the Office for National Statistics (ONS) today and they confirm the initial figures that reveal the UK economy only grew by 0.5 per cent.
Following a fall of 0.5 per cent in the final quarter of 2010, the combined figures show that the economy as a whole was flat for the six months from October 2010 to the end of March 2011.
This represents a far worse set of figures than the UK’s major trading partners and shows that Britain is coming out of the recession at a lower pace. The figures could have been worse but for a high level of public sector spending from the government that contributed one per cent to GDP. However, cuts in public spending means this level of contribution from this sector of the economy is unlikely to happen in the near future.
In addition, household spending fell by the largest amount since the recession started, falling by 0.6 per cent in the quarter and is unlikely to increase this year due to low wage increases. Government hopes that business investment will drive the recovery also took a hit as the revised GDP figures revealed that business investment fell by more than seven per cent in the quarter.
However, there was good news concerning trade, which made its biggest overall contribution to a quarters GDP growth for more than 50 years and helped reduce the trade deficit by half. The deficit for the final quarter of 2010 was £11.5 billion but fell to £5.7 billion for the 2011’a first quarter.
The figures prompted economists to revise down growth expectations for the rest of 2011 and 2012. The Organisation for Economic Cooperation and Development (OECD) released a report today suggesting that UK GDP growth would be just 1.4 per cent against the governments own prediction of 1.7 per cent. Looking ahead to 2012 the OECD predicted growth of just 1.8 per cent against the UK governments’ forecast of 2.5 per cent.
Howard Archer, Chief UK & European Economist for HIS Global Insight said: “we project GDP growth to be limited to around 0.4% quarter-on-quarter through the second-fourth quarters of 2011. This is seen resulting in overall GDP growth of 1.4% in 2011.”
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