The continuing weakness in the economy was confirmed yesterday as the anaemic expansion in GDP for the last few months of last year was increased from the 0.1 per cent previously estimated by the Office for National Statistics (ONS) to 0.3 per cent.
Ministers took comfort in the upward revision, even though the second figure still leaves the UK towards the bottom of the international league table.
The Chancellor, Alistair Darling, offered cautious optimism. "What the figures show is that the economy is recovering; they're welcome figures," he said. "But if you look at the other indicators around, whether it's in Europe or America ... you can see there's a lot of uncertainty."
Economists and political analysts agreed that the apparent improvement in the economy improved the chances of the Government further pulling back the Conservatives' opinion poll lead, down to 5 per cent in the latest survey. The Budget, widely rumoured to be due on 24 March, would be a springboard for a 6 May poll, although rumours also persist of differences between the Treasury and No 10 on how much of a "giveaway" Budget Mr Darling could engineer.
Yesterday the Chancellor told Sky News: "I am working on the Budget now. I shall be delivering the Budget, don't worry about that."
Those remarks suggest a May rather than April poll because one held sooner wouldn't give the Government enough time to get the Budget approved by Parliament. Also, parliamentary rules state that Mr Darling must wait at least three months after the 9 December pre-Budget report to present the full Budget, suggesting 17 or 24 March as likely dates.
Colin Ellis, economist at Daiwa Securities, said: "The figure is hardly cause for much celebration. There is, as yet, little sign of the much hoped-for rebalancing of the economy towards exports and capital spending.
"However, the data could well have one big repercussion. Given the likely temporary boost to growth in the fourth quarter, GDP in the first quarter of this year could be weak, especially given the bad weather in January. That means that April's preliminary GDP data for the first quarter of this year could show a weakening in economic growth, rather than a strengthening."
Much of the improvement in the economic figures was due to an improvement in demand for stocks at retailers, and there was also an upswing in the services sector – accounting for 70 per cent of the economy – as well as industrial output. However, investment remains exceptionally weak – figures earlier this week put it at a 40-year low – and, despite the deprecation of 25 per cent in the pound since 2007 there is little sign yet of an export-led recovery taking hold.
Muddying the picture, the ONS also revised the growth figures for the third quarter of last year downwards, which flattered the fourth quarter numbers. The ONS now thinks that the economy shrank by 0.3 per cent rather than 0.2 per cent between June and September.
George Osborne, the shadow Chancellor, commented: "It strengthens the Conservative argument that we now have to make a start on dealing with the debts that Gordon Brown has run up. That is how we will bring back confidence to the economy and deliver a proper, sustainable, job-creating recovery."
The Liberal Democrats' Vince Cable, said it underlined "the folly of rushing into rapid cuts".Reuse content