Hopes that the UK would shake off its early-year doldrums were temporarily dashed as official growth figures showed a widening trade gap and surprising weakness from the nation’s dominant services firms.
Economists had hoped that the Office for National Statistics would lift its initial 0.3 per cent estimate for GDP growth between January and March to 0.4 per cent, following healthier signs from manufacturers and builders.
But the economy sucked in imports during the first quarter, far outstripping exports and leaving net trade dragging 0.9 percentage points from the wider economy. The surge – driven by oil, machinery and cars – is likely to revive concerns that recovery is too reliant on domestic consumers.
The stronger pound also hit its highest level against a basket of currencies since August 2008 in March, dampening the competitiveness of UK exporters in the eurozone and other markets.
Chris Williamson, chief economist at financial data firm Markit, said the economy “is being driven again by consumers”, adding: “The unbalanced pattern of growth is likely to result in a slower expansion of GDP in 2015 than expected.”
However, there was slightly better news on business investment, which rose 1.7 per cent – the best since April-June last year.
The pace of household spending softened slightly to 0.5 per cent, but experts expect it to grow strongly this year thanks to the falling prices of food and petrol.
The Bank of England predicts overall growth for the quarter will eventually be revised up to 0.5 per cent.Reuse content