Stronger household spending drives UK first-quarter growth
Recent official data showed that Britain’s households spent more, and companies increased investment, at the fastest pace in a year; extending the country’s strong economic growth into the first three months of 2014.
These figures offer some signs that Britain’s rapid growth is slowly getting on the more sustainable footing that the Bank of England wants to see before it raises interest rates, though by far the largest driver of growth remains consumer demand.
The Office for National Statistics said, gross domestic product between January and March grew by 0.8 percent from the last three months of 2013.
Victoria Clarke, an economist with bank Investec said “It looks like the consumer spending momentum is still there and is picking up, so we can take heart that the recovery is in train.”
The business investment growth showed that companies were also confident about the recovery, she said.
But the pound, which has strengthened on rising expectations of an early interest rate hike, fell after other data showed a bigger-than-expected fiscal deficit. Government bond and share prices were little changed. Britain’s economy remains 0.6 percent smaller than its peak in early 2008, but is likely to surpass that level in the current quarter and the BoE forecasts growth in 2014 will reach 3.4 percent, its fastest pace since 2007.
However, the central bank wants to ensure growth is on a firmer footing before it raises interest rates from their record low of 0.5 percent – something economists expect in around a year – and Thursday’s data offered some evidence of rebalancing.