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UK economy avoids triple-dip recession | UK economy avoids triple-dip recession |
(35 minutes later) | |
The UK economy has avoided falling back into recession. | The UK economy has avoided falling back into recession. |
The Office for National Statistics said its preliminary estimates for gross domestic product (GDP), showed the economy grew by 0.3% in the first three months of the year. | The Office for National Statistics said its preliminary estimates for gross domestic product (GDP), showed the economy grew by 0.3% in the first three months of the year. |
The figure means the economy avoided two consecutive quarters of contraction - the definition of a recession. | The figure means the economy avoided two consecutive quarters of contraction - the definition of a recession. |
The growth figure was better than expected and Chancellor George Osborne said it was an "encouraging sign". | The growth figure was better than expected and Chancellor George Osborne said it was an "encouraging sign". |
There had been fears the UK would enter its third recession in five years, a so-called triple-dip recession. | There had been fears the UK would enter its third recession in five years, a so-called triple-dip recession. |
Economists say the news should give a small psychological boost to consumers and businesses, but the broader picture of the economy remains the same. | Economists say the news should give a small psychological boost to consumers and businesses, but the broader picture of the economy remains the same. |
The UK economy has been on a plateau since the financial crisis hit in 2008, with small spurts of growth and contraction. | The UK economy has been on a plateau since the financial crisis hit in 2008, with small spurts of growth and contraction. |
'Making progress' | 'Making progress' |
The better-than-expected rise in GDP for the first quarter was largely down to strong growth in the services sector and a recovery in North Sea oil and gas output. | |
The ONS figures also showed that GDP had risen by 0.6% when compared with the first quarter of 2012, the strongest year-on-year increase since the end of 2011. | |
Chancellor George Osborne said: "Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress. The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows. | Chancellor George Osborne said: "Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress. The deficit is down by a third, businesses have created over a million and a quarter new jobs, and interest rates are at record lows. |
"We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future," he added. | "We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth, but by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future," he added. |
Matt Basi, from CMC Markets UK, said: "Growth of 0.3% is hardly cause for celebration, but may ease some of the pressure that has been piling on the government's austerity plans." | |
The chancellor has faced calls from the International Monetary Fund to rethink the pace of the austerity programme. | The chancellor has faced calls from the International Monetary Fund to rethink the pace of the austerity programme. |
But the government insists its austerity measures are vital to bringing down borrowing, and guarantee growth in the long-term. | |
Poor growth has already led to two international credit rating agencies stripping the UK of its top-notch triple-A rating. | Poor growth has already led to two international credit rating agencies stripping the UK of its top-notch triple-A rating. |
Labour MP John Mann, who sits on the Treasury select committee, said the GDP figures were nothing to celebrate. | |
"We're falling further and further behind our competitors and of course the big emerging economies - the Chinas, the Indias - they're galloping ahead of us. They're worrying if they're down to eight, nine per cent - they're seeing that as a crisis." | |
"We're in danger of celebrating 0.3%. That's the perspective we need to have. We are falling behind and we need some major shift in policy to turn that round," he added. | |
Strong services | |
The pound rose nearly 1% to $1.5414 against the US dollar on the news, its highest point in two months. | |
The services sector, which accounts for three-quarters of the economy, grew by 0.6% in the quarter, with a strong performance from hotels and restaurants. | |
Transport and communications also made a solid contribution with growth of 1.4%. | |
But there were some areas of continuing weakness. Construction activity fell 2.5% in the first quarter and remains more than 18% lower than it was before the start of the financial crisis in 2008. | |
Phil Orford, the chief executive at the Forum of Private Business said: "While the service sector looks to have led the way, the construction industry figure is more worrying, and shows the need to get projects moving at a quicker pace." | |
The size of the economy as a whole remains 2.6% below its pre-crisis peak. | |
"The recovery still faces significant obstacles ahead, with households still experiencing falling real pay and policymakers still struggling to get bank lending to rise," said Vicky Redwood, UK economist at Capital Economics. | |
"Today's figure offers some hope that things might finally be starting to move in the right direction again." |