The Office for National Statistics estimates that real GDP grew by 0.3 per cent in the first quarter: economists had expected 0.5 per cent. Oil and construction output fell, and growth in financial and business services also slowed markedly. Chris Williamson at Markit says this "will inevitably result in economic forecasts being revised down", warning that the Bank of England's forecast for 2.9 per cent growth this year now "looks somewhat optimistic".
Barclays' Fabrice Montagne has already cut his forecast, from 2.7 per cent to 2.3 per cent. He warns that political uncertainty and a likely resumption of fiscal austerity later in the year will hold back growth.
But others don't believe the ONS's estimate. "There is a glaring disparity between the GDP data and other evidence on the state of the economy," says Martin Beck of the EY Item Club, adding that he would be "very surprised" if growth is not revised up. Such revisions are common; since 1993 the average revision (ignoring the direction) between the ONS's first and last estimate for quarterly growth has been 0.4 percentage points. And, he adds "the prognosis for the UK economy looks pretty good". He believes a recovery in the euro area will boost demand for UK exports, while high profits and cash holdings increase capital spending.
Economists agree, though, that even if the figures are revised, labour productivity is stagnating; the ONS estimates that total hours worked rose 0.5 per cent in the three months to February. This points to weak long-run growth. Fathom Consulting's Danny Gabay says: "It is supply rather than demand that determines a country's sustainable rate of growth. And supply, as measured by labour productivity, is going nowhere."
