GDP rebound even stronger

BRITAIN staged an even stronger rebound out of recession than had previously been thought, official revisions to fourth quarter GDP data showed yesterday.

The Office for National Statistics raised the quarterly growth estimate to 0.4 per cent from 0.3 per cent at the second revision and 0.1 per cent at the initial publication.

While the good news was welcomed yesterday by the City and the Treasury, analysts warned that the road to recovery would still be bumpy and that concerns remained about its sustainability.

Charles Davis at the Centre for Economic and Business Research (CEBR) said: “The factors driving growth in this quarter are likely to peter out in 2010. As such, the recovery will need to become more broad based; for sustainable growth to return, a pick up in business investment and export growth is needed.”

David Kern, chief economist at the British Chambers of Commerce also urged policymakers to cement the recovery.

“A double-dip recession is still a potential threat that must be avoided at all costs. Given the dangers still facing the economy, policy must remain expansionary. Any consideration of raising rates and withdrawing quantitative easing must be postponed until there is more conclusive evidence that growth is secure,” he said.

Economists warned that the recovery would need to become more broad based if it is to become entrenched. Much of the rebound has so far been driven by consumer and government spending.

Hetal Mehta, senior economic advisor to the Ernst & Young ITEM Club, said: “With household income growth likely to slow further and fiscal tightening on the way, growth over the course of 2010 will be sluggish and bumpy – we still anticipate GDP growth of no more than one per cent this year.”