UK Economy Grows More Than Estimated

The U.K. economy grew more than previously estimated in the first quarter as rebounding investment and the biggest jump in manufacturing for four years strengthened the recovery., Bloomberg 5/25/2010 9:36:06 AM

Gross domestic product rose 0.3 percent from the final three months of 2009, compared with an initial measurement of 0.2 percent, the Office for National Statistics said. Manufacturing surged 1.2 percent, the most since the first quarter of 2006.

The Bank of England said this month that the economy will continue to gain momentum, though it remains vulnerable to shocks from Europe’s sovereign debt crisis. Chancellor of the Exchequer George Osborne yesterday set out 6.2 billion pounds ($9 billion) in spending cuts to show the coalition government’s resolve in cutting the record budget deficit.

The change in the GDP increase followed upward revisions to manufacturing and construction, the statistics office said. Services, which account for 76 percent of the economy, grew 0.2 percent, unchanged from the previous estimate in April.

Manufacturing has benefited from the weakness of the pound, which has declined by about a quarter on a trade-weighted basis since the start of 2007, making British exports cheaper.

Today’s GDP release showed investment jumped 1.5 percent after a 2.7 percent drop in the previous quarter. Government spending rose 0.5 percent and consumer spending was unchanged, the statistics office said. Inventories fell by 1.3 billion pounds, the least since the third quarter of 2008.

The GDP deflator, used to account for price changes in the data, showed a 3.6 percent annual increase, the most since the third quarter of 2006. Inflation accelerated to a 17-month high of 3.7 percent in April, breaching the government’s 3 percent upper limit.

Bank of England policy makers have refused to rule out further expansion of monetary stimulus after cutting the benchmark interest rate to a record low of 0.5 percent and spending 200 billion pounds on bonds.

UK Economy Grows More Than Estimated