(June 27): Britain’s economy showed signs of a more balanced recovery in the first quarter as business investment surged and net trade added to growth.
Investment rose 5 percent in the three months through March, the Office for National Statistics said in London today. That’s the fifth consecutive increase, the longest period of expansion in 16 years. Net trade added 0.3 percentage points to gross domestic product, which rose an unrevised 0.8 percent in the quarter. A separate report showed the current account deficit narrowed.
Consumer spending rose 0.8 percent in the period, adding 0.5 percentage points to GDP. That’s the 10th consecutive increase and came even as disposable income fell 0.2 percent. The saving ratio was 4.9 percent compared with 4.8 percent in the final three months of 2013.
Britain’s recovery has left the economy just 0.6 percent smaller than its peak in the first quarter of 2008, and the brighter outlook has prompted speculation about when the Bank of England will lift borrowing costs from a record low. Governor Mark Carney said on BBC Radio 4 today that the recovery “has proceeded even better than we had expected.”
“The economy is performing the strongest of all the advanced economies,” Carney said in the interview. “Inflation is back under control.”
Today’s data also showed that the current-account deficit narrowed to 18.5 billion pounds in the first quarter, or 4.4 percent of GDP, from 23.5 billion pounds in the fourth quarter. That’s down from a record 5.9 percent of GDP in the third quarter of last year.
The quarterly growth in business investment was revised from an initial estimate of 2.7 percent. It contributed 0.4 percentage points to GDP, the most since the first quarter of 2012. Gross fixed capital formation increased 2.4 percent, led by software.
Exports fell 0.1 percent in the first quarter, less than initially estimated, while imports dropped 1.2 percent. The revision on exports was largely due to financial services.
In another report, the ONS said its index of services rose 0.3 percent in April from the previous month and was up 3.1 percent from a year earlier.