UK GDP grows 0.5pc: reaction
Britain's economy made only a feeble recovery in the first quarter of this year, barely making up for the surprise contraction at the end of 2010, official data showed. This is how economists reacted to the figures.
10:17AM BST 27 Apr 2011
Comments
HOWARD ARCHER, GLOBAL INSIGHT
"One crumb of comfort is that the underlying performance looks a little stronger than indicated by the headline GDP figure ...Nevertheless, with fiscal headwinds mounting and consumers' purchasing power squeezed, the outlook is worrying.
ROB CARNELL, ING
"A 0.5pc rise is in fact a better outcome than it first appears. Not all of the growth in the first quarter will have been a bounceback from snow in the fourth quarter, so there does appear to be some underlying growth here.
"Today's figures provide some support for the government's argument that the pace of fiscal consolidation will not derail the economy, and that deficit reduction measures remain manageable for the economy.
"However, they do not provide the Bank of England with enough of an excuse to respond to high headline inflation with tighter policy. A May rate hike still seems a tough proposition at this stage."
VICKY REDWOOD, CAPITAL ECONOMICS
"The UK GDP figures suggest that underlying activity in the economy remains pretty much stagnant. The 0.5pc quarterly rise in output means that the economy did nothing more than reverse Q4's snow-related dip. In fact, if there was some temporary "catch-up" of output lost in Q4, then underlying growth may even have been slightly negative.
DAVID PAGE, LLOYDS
"They're not wildly surprising. We thought there was a risk the numbers could be a little softer. We were pleased to see services pick up but part of that is due to the weather rebound. We would treat these numbers with a degree of suspicion.
"I think the underlying pace of the domestic economy is still soft. If you assume the weather effect is smoothed, then effectively growth is zero over the past two quarters. This reinforces the point that the MPC is going to view the domestic recovery is too fragile to tighten just yet."
DAVID OWEN, JEFFERIES INTERNATIONAL LIMITED
"Given the briefing of the Cabinet by George Osborne, this is probably on the day slightly better than expectations. But I think politically, GDP is now basically unchanged over the last six months, and so it does bring into question some degree of political risk in the market because we have got these important elections occuring next Thursday, and there has been some speculation about growing risks in the coalition.
"In terms of the monetary policy decision, this is of no interest whatsoever but politically it's of more interest."
HETAL MEHTA, DAIWA CAPITAL MARKETS EUROPE
"Today's figures suggest underlying growth in the UK economy is virtually non-existent ... And with the full force of the public spending cuts yet to be unleashed, there is little reason to expect GDP growth to pick up much in the second quarter. We see the first rate increase in August but the risks are very much skewed to pushing that back."
PHILIP SHAW, INVESTEC
"The latest figures suggest that construction figures fell by 5pcon the quarter, compared to a period where the sector was disrupted severely by the snow. There appears to be an considerable degree of volatility in the construction figures, which means we take the preliminary GDP figures with a pinch of salt. We remain of the view that the fragility of consumer spending will result in rates being kept on hold next week."
ROSS WALKER, RBS FINANCIAL MARKETS
"Pretty much as expected both in terms of the headline print and the breakdowns. It's not disastrous, but it is a bit lacklustre. We have basically just taken back the fourth quarter fall, so the underlying economic environment since the autumn looks a bit flat.
"You do have what looks to me like a surprisingly large fall in construction output. Do we really believe that the level of construction output was lower in January than in December? We may well see some revisions here."
GEORGE BUCKLEY, DEUTSCHE BANK
"It's in line with expectations. But when you look at the the proportion of the economy which is expanding quite well, it's not that bad. What really dragged this number down was only 8pc of the economy - we're talking about energy production and construction. If it had not been for them, GDP would have expanded more significantly."
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