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UK Economy Expands On Consumer Spending In Q1

Thu, 22nd May 2014 14:08

LONDON (Alliance News) - The UK economy grew at a faster pace as initially estimated in the first quarter, driven by consumer spending and business investment, suggesting that a more balanced recovery is on track, second estimates from the Office for National Statistics showed Thursday.

Gross domestic product grew 0.8% from the prior quarter, unchanged from the estimate published on April 29. The sequential growth follows a 0.7% rise in the fourth quarter of last year.

On a yearly basis, GDP rose 3.1% in the first three months of 2014, also in line with initial estimates.

An upward revision in construction output was offset by the slower than estimated rise in production.

Total production output grew 0.7%, which was revised down from 0.8%, while the increase in construction was revised to 0.6% from 0.3%. At the same time, the growth in the dominant service industries was confirmed at 0.9%.

In March, the index of services climbed 3.1% from the same period of last year, another report from the ONS revealed.

The expenditure-side breakdown of GDP, released for the first time, showed that household spending and business investment contributed the most to growth in the first quarter.

Household spending expanded for tenth consecutive time in the first quarter. Spending advanced 0.8% as higher expenditure of consumers are linked to better employment situation and rise in income.

At the same time, government spending gained only 0.1%. Gross fixed capital formation advanced 0.6%, but slower than the 1.9% increase in the prior quarter. Within total investment, business investment surged 2.7%.

Including the alignment adjustment, the level of inventories increased by GBP 2.8 billion in the first quarter, following an increase of GBP 1.9 billion in the fourth quarter.

Following a 2.8% rise in the fourth quarter, exports fell by 1% in the latest quarter, while imports fell by slightly more than exports.

Data today revealed that budget deficit widened to GBP 11.5 billion in April from GBP 9.5 billion in the same period of prior year.

For the financial year 2013/14, public sector net borrowing excluding the temporary effects of financial interventions, the transfer of the Royal Mail Pension Plan and the transfers from the Bank of England Asset Purchase Facility Fund was GBP 107.4 billion, data showed.

Chancellor met the downwardly revised deficit target for 2013/14. A deficit of GBP 107.4 billion in 2013/14 highlighted the fact that here is still an awfully long way to go in getting the public finances into decent shape, said Howard Archer, an economist at IHS Global Insight.

April's public finances suggested that the fiscal consolidation has got off to a poor start to the fiscal year, Samuel Tombs, a UK economist at Capital Economics said. However, he said April's borrowing figures are probably not a good guide to the likely trend over the rest of the fiscal year.

Copyright RTT News/dpa-AFX

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