GDP grew 0.5 per cent in the first quarter of 2011, but household spending contracted by 0.6 per cent, prompting fears that the economy is stagnating.
Gross domestic product (GDP) grew 0.5 per cent in the first quarter of 2011, but household spending contracted by 0.6 per cent, prompting fears that the economy is stagnating.
The Office for National Statistics (ONS) revealed that GDP growth remained unchanged following its first estimate last month.
However, GDP data shows that consumer spending declined in the first three months of this year and is now 0.3 per cent lower than in the first quarter of 2010.
Manufacturing output was up 1.1 per cent but was offset by a 3.4 per cent decline in utilities output, and mining and quarrying output, which fell 1.4 per cent. Output in the production industries was revised down 0.2 per cent.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, remains positive about the figures, saying, ‘We’re now beginning to see firm evidence that some rebalancing of the economy is underway on the back of a boost to net trade from a solid expansion in manufacturing exports.’
The news that business investment shrank by 7.1 per cent in the period has also put the UK’s economic recovery into doubt.
Chief economist at the British Chambers of Commerce, David Kern, says the figures are ‘disappointing’ and reveal that Britain’s performance is much weaker than its major European competitors France and Germany.
‘The outlook for the economy remains highly uncertain. While we expect growth in the second quarter to remain in positive territory, the pace of expansion is likely to be slow,’ he warns.
Output in the service industries fared well, up 0.9 per cent in the quarter.
The ONS attributed growth in the service industries to an increase of 3 per cent in the transport, storage and communication sector, and a rise of 0.8 per cent among hotels and catering. It also reported a 0.6 per cent rise in business services and finance, and government and other services respectively.