Britain’s economic recovery has been more balanced than previously thought, latest official figures have shown.
Final GDP figures for the first quarter confirmed the UK’s economic growth accelerated to 0.8pc at the start of the year, missing analysts’ expectations of an upward revision to 0.9pc. But the figures from the Office for National Statistics (ONS) also revealed the expansion was more balanced than previously thought.
Manufacturing and construction contributed more strongly to GDP than earlier estimates indicated, while latest figures show business investment grew at nearly twice the rate than had been previously thought.
Manufacturing activity expanded 1.5pc in the first quarter, latest figures show, up from the previous estimate of 1.4pc growth.
Construction meanwhile expanded more than twice as much as previously thought in the first three months of the year. Latest figures show it grew 1.5pc, compared with earlier estimates of 0.6pc expansion. The industry has enjoyed a significant boost from the government-backed mortgage scheme for new builds, Help to Buy.
Figures also showed that business investment surged 5pc in the first quarter of the year, significantly more than previously estimated 2.7pc increase.
“[The upward revision to business investment] not only indicates that growth is becoming less centred on consumer spending but could also have positive implications for future productivity growth,” said Howard Archer, chief UK economist at IHS Global Insight.
The services sector, which accounts for more than three quarters of the UK’s economic growth, grew 0.8pc in the first quarter, less than previously thought. Earlier estimates said the services sector expanded 0.9pc in the first quarter. Nonetheless this industry remained the strongest driver of economic growth in the quarter.
In another sign the economy is becoming more balanced, separate figures from the ONS showed the UK’s current account deficit narrowed to £18.5bn in the first quarter of the year, compared to £23.5bn in the previous three months.
Samuel Tombs, senior UK economist at Capital Economics said that while this remains “extremely large”, that there were “good reasons” to believe it would narrow further in the coming years.
“While the pound’s appreciation is likely to prevent the trade deficit from narrowing much soon, the current weakness of investment income looks likely to be partly temporary. Much of the weakness has reflected poor returns of the UK’s overseas direct investments, which are concentrated in the euro-zone”, he said.
“Now that the euro-zone is out of recession, these earnings should slowly recover.”
Separate figures from the ONS showed the services sector grew 3.1pc in the year to April.