Britain dodges recession with Q1 growth of 0.3%
Britain dodged recession after official figures showed the economy grew in the first quarter.business Updated: Apr 25, 2013 14:49 IST
Britain dodged recession after official figures showed the economy grew in the first quarter.
The Office for National Statistics said on Thursday that the economy grew by 0.3% in the first quarter compared with the previous three-month period.
Analysts on average were expecting growth of 0.1%. But with growth so anemic, even a statistical blip could have put the number in negative territory and pushed Britain into its third recession since 2008.
A recession is typically defined as two quarters of economic contraction. The economy contracted in the fourth quarter of 2012.
Observers had feared that news of another recession - what the media had been calling a "Triple Dip" - would scare consumers even more, feeding into a vicious cycle that has the economy flat-lining.
Britain's government desperately wanted a robust number to justify its austerity policies, and will breathe a huge sigh of relief at the news. The opposition Labour Party has pressured it to ease off on budget cuts, which hurt economic growth.
Even the International Monetary Fund pressured Treasury chief George Osborne to slow down the austerity measures in hopes of reviving the economy, whose output was worth 1.4 trillion pounds ($2.1 trillion) in 2012.
A closer look at Thursday's figures showed the services sector contributed most of the growth in the first quarter but industrial production also helped.
"Today's figure offers some hope that things might finally be starting to move in the right direction again," said Vicky Redwood, U.K. economist at Capital Economics in London.
She said the figures will decrease the chances that the Bank of England will increase its stimulus program, in which it pumps money into the economy to spur lending and growth. The pound rose in currency markets as a result, trading 0.9 percent higher against the dollar, at $1.5412.
Still, the economy remains weak. The ONS said it has been broadly flat over the last 18 months.
Inflation is rising faster than wages, meaning living standards are slipping, and unemployment is high at 7.9%.