GDP growth revised to 0.7 per cent

24-08-2006

Gross domestic product (GDP) rose in the UK during the first quarter of 2006 by 0.7 per cent, as the government upwardly revised last month's predicted increase of 0.6 per cent.

The official figures suggest that the adjustment was down to increased returns from business services output, particularly in the production, manufacturing and services industry.

Today's data now means that GDP is 2.3 per cent higher than at the beginning of last year, while the strengthening of production and manufacturing by 0.8 per cent was the first rise for the latter in 18 months.

While services, by far the largest part of the UK's economy, reinforced by 0.7 per cent, household expenditure growth slowed to 0.3 per cent after registering a rise of 0.8 per cent in the last quarter of 2005.

Commenting on today's GDP figures, Thushani Gajasinghe, economist at the Centre for Economics and Business Research (cebr), explained that revisions typically occurred in periods of surprising economic growth.

"GDP is now estimated to have grown by 1.9 per cent in 2005 instead of the 1.8 per cent previously reported. Growth in previous years has also been revised up by between 0.1 and 0.2 percentage points for each year," she said.

And the economist revealed that the GDP rise was likely to convince the Bank of England to raise interest rates in the summer.

But Ms Gajasinghe said "we are not expecting rates to change from 4.5 per cent yet as growth is in-line with its long-term trend and the Monetary Policy Committee are likely to be wary about the outlook for international growth, particularly in the US".

Also released today was the latest consumer confidence index from Gfk NOP, which showed that the continued effect of the World Cup meant Britons were feeling more optimistic about the economy, with the index rising one point to minus three.

Carol Bernasconi, divisional director at the research firm, said: "With rises in four of the five measures, this is a strong indication that consumers are feeling more buoyant than last month. This positive change could be seen as a reflection of the nation's hopes for the World Cup."


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