The risk of a double-dip recession eased today with official figures showing the UK economy grew by 0.5% in the first three months of this year.
But while Chancellor George Osborne welcomed the return to growth, some economists were voicing concerns over the still-fragile nature of the economy with Labour claiming the recovery has been “choked off” by government economic policy.
The first-quarter growth, revealed in initial figures from the Office for National Statistics, is less than the 0.8% forecast by the Office for Budget Responsibility and follows the decline in the economy of 0.5% during the final three months of 2010.
Manufacturing and services sectors performed well, achieving growth of 1.1% and 0.9% respectively, although a slump in construction output by 4.7% took the shine off the figures.
Mr Osborne said: “It is good news that the British economy is growing. It is particularly good news that manufacturing is growing so strongly, when we have had such an unbalanced economy in recent years, and manufacturing has not done so well.
"Jobs have been created since the New Year and government borrowing is down.”
Shadow Chancellor Ed Balls hit back: “If George Osborne thinks zero growth over six months is good news and a sign that the recovery is on track then he is more out of touch and out of his depth than I feared.”
British Chambers of Commerce chief economist David Kern told the BBC: “Given the fragility of the recovery, it is vital for the government to persevere with policies that support growth, and remove the obstacles that prevent businesses from creating jobs and exporting.”
And Vicky Redwood of Capital Economics told Reuters: “Underlying activity in the economy remains pretty much stagnant. The economy did nothing more than reverse Q4’s snow-related dip.”
The low rate of growth means the Bank of England is less likely to raise interest rates over the next few months, even though it needs to tackle inflation of 4% – twice its targeted level.
Deutsche Bank economist George Buckley said: “We are expecting the Bank of England to raise rates in August, but it is far from certain whether they will do that.”
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