UK recovery picks up speed as growth hits 0.8pc

 
Peter Spence
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A little softer than expected, but nonetheless an acceleration in UK growth.

GDP growth has come in at 0.8 per cent for the first quarter of 2014, up from 0.7 per cent, according to the Office for National Statistics.

Consensus forecasts suggested that we'd see even stronger growth - of 0.9 per cent - this quarter.

Most of the increase came from the services sector, where output increased by 0.9 per cent, followed by increases in production and construction of 0.8 per cent and 0.3 per cent respectively.

Only agriculture saw output decrease - by 0.7 per cent in a single quarter. Jonathan Loynes, chief European economist at Capital Economics, says that this breakdown suggests the recovery remains "heavily dependent" on consumer spending.

Nancy Curtin, chief investment officer of Close Brothers Asset Management, says that "the UK’s economy has accelerated from escape velocity into overdrive."

As unemployment has fallen to a five year low, "consumer spending power is returning as wages rise against inflation, and the trade deficit is narrowing," says Curtin. Economic activity remains 0.6 per cent below its 2008 peak, but Loynes says we're now at least seeing a "Goldilocks scenario" - solid, but not excessive growth.

With quarter on the same quarter last year growth at a 2007 high of 3.1 per cent, Ben Southwood, head of policy at the Adam Smith Institute, suggests that "George Osborne and the Treasury must have felt rather smug when they saw these figures early yesterday."

But while it would be easy for Osborne to conclude his plan is working, and that everything is fine in the UK economy, the recovery has been "painfully slow and long," says Southwood. "We should be seeing a much swifter return to pre-recession living standards."