GDP figures
According to the Office for National Statistics (ONS), activity in the manufacturing and services sectors picked up. The services sector returned to growth, rising by 0.9% over the quarter, while manufacturing grew by 1.1%. Business services and finance increased by 1%, having shrunk by 0.8% in the previous quarter. However, the construction sector registered a marked decline of 4.7% during the quarter, having already weakened by 2.3% in the final three months of 2010.
The British Chambers of Commerce (BCC) pointed out that economic growth had proved significantly lower than the 0.8% forecast by the Office for Budget Responsibility. Elsewhere, the Confederation of British Industry (CBI) commented that, “while encouraging, (the figures) reaffirm our view that the recovery remains slow and sluggish.”
Nevertheless, the figures did provide welcome evidence of improvement, particularly in the manufacturing sector. According to the CBI’s survey of industrial trends, order books at UK manufacturers showed that output has risen over the past three months, indicating that the manufacturing recovery is “firmly on track.” Meanwhile, exports surged during February, boosted by demand from non-EU markets, reaching their highest level since records began in 1980 and, more importantly, narrowing the UK’s trade deficit with the rest of the world.
The UK’s sluggish economic growth is unlikely to put any more immediate pressure on the Bank of England (BoE) who voted to keep rates on hold yet again, at just 0.5%, at the May meeting. Rates have now remained unchanged since March 2009. Inflationary pressures also eased slightly during March, assisted by heavy discounting of food and non-alcoholic beverages in supermarkets. Nevertheless, the rate remains relatively high at 4%, and the BoE believes it could rise as high as 5% this year before it moves back towards the 2% target level by the end of 2012 .
There messages from the UK high street, however, remain mixed. According to the British Retail Consortium (BRC) , retail sales experienced their most dramatic drop since records began. The BRC cited consumers’ “underlying uncertainty” about jobs and wages as reasons for the fall during March. However, according to official figures from the ONS, retail sales picked up during March, increasing by 1.3% year on year.
The contents of this article should not be construed as advice and do not necessarily reflect our views. Independent Financial Advice should always be attained in order to assess your own individual circumstances.
