UK GDP falls in Q1 but Sunak confident in recovery after March rebound
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Britain’s economy grew by a stronger-than-expected 2.1 per cent in March, picking up speed in what Chancellor Rishi Sunak expects to be a sharp economic comeback.
The monthly growth beat economists’ predictions of a 1.3 per cent leap, the Office for National Statistics said this morning.
“Despite a difficult start to this year, economic growth in March is a promising sign of things to come,” Rishi Sunak said.
“As a result of the actions that we’ve taken over the past year, we’ve managed to protect a lot of household incomes. I think that bodes well for the rest of the year.
“Our plan is working, consumers have built up savings. And what we now know, which we didn’t know a year ago, (is) that actually as things open up, people do want to get out and go back to doing the things that they used to do, and I think we will see that in the coming weeks and months.”
Quarterly contraction softer than expected
Gross domestic product (GDP) contracted by 1.5 per cent in the first three months of 2021, led by declines in services and production output.
The quarterly contraction was softer than forecasts of a 1.7 per cent decline.
Construction output rose during the quarter, but school closures and a large fall in retail sales dragged down GDP growth.
During March alone, GDP grew by 2.1 per cent but remains 5.9 per cent below its pre-pandemic peak.
Compared with the same quarter a year ago, when the initial impacts of Covid began to show, the UK economy fell by 6.1 per cent.
‘Long hot summer’ for British businesses
The pound remained largely flat against the dollar this morning, still above $1.414.
The Bank of England said last week it expected Britain’s economy to recover quickly and grow by 7.25 per cent in 2021.
Ana Boata, head of macroeconomic research at Euler Hermes, said: “Businesses and the government alike will feel this data marks a turning point for the UK economy.
“With the ongoing easing of restrictions, confirmed this week by the prime minister, there’s hope that this could be the start of a long hot summer for British businesses.”
Howard Archer, chief economic adviser to the EY Item Club, added: “March’s month-on-month GDP growth of 2.1 per cent was the result of expansion across all output sectors. Services output was healthy, expanding 1.9 per cent, helped by strong activity in the health sector.
“Industrial output expanded 1.8 per cent month-on-month as manufacturing output grew 2.1 per cent. Construction output grew 5.8 per cent.
“On the expenditure side of the economy, it looks like increasingly confident consumers were more prepared to spend in March: retail sales volumes rose 5.4 per cent month-on-month.”