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View the article online at http://citywire.co.uk/wealth-manager/article/a752687

UK GDP rises 0.8% in Q1 as budget deficit widens

by Elsa Buchanan on May 22, 2014 at 10:10

UK GDP rises 0.8% in Q1 as budget deficit widens

UK GDP grew by 0.8% over the first quarter, driven by consumer strength, as the budget deficit in April proved larger than expected.

Over the past 12 months, the economy grew 3.1%, in line with expectations, representing the biggest annual increase since the fourth quarter of 2007.

However, April’s public finance figures made for less encouraging reading, with government spending up 0.1% over the quarter. This represented £11.5 billion in April, £2 billion up on last year's figure.

'Since the Office for Budget Responsibility (OBR) expects borrowing this year to be about 11% lower than last year, today’s borrowing number suggests that the fiscal consolidation has not begun the fiscal year on a good footing,' Samuel Tombs, UK economist at Capital Economics.

That said, Tombs explained revisions to the monthly borrowing numbers tend to be larger at the start of the fiscal year, 'so we would caution against drawing any strong conclusions from April’s figures.'

He added: 'The sources of growth seem sustainable and we continue to expect the recovery to broadly maintain its current pace over the coming quarters'.

With reference to GDP over the first quarter, more muted export figures, which fell 1% during the quarter, were offset by a 1.1% drop in imports, the ONS report stated.

Capital Economics highlighted that expenditure breakdown showed the overall recovery is still receiving considerable support from investment.

Indeed, business investment rose by a quarterly 2.7% and was 8.7% higher than a year ago.

'With a strong rebound in investment enhancing the economy’s productive capacity, the recovery is unlikely to hit the buffers and generate inflation soon.'


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