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British GDP Growth Breaks Above 3%

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British GDP Growth Breaks Above 3%

Britain’s Gross Domestic Product growth has just broken above the 3% level, preliminary data just released for Q1 is showing a year on year rise of 3.1%, up from a previous reading of 2.7% but slightly missing the economists consensus expectation for a 3.2% growth figure. The quarter on quarter figure came in at a 0.8% rise, this is up from 0.7% the previous quarter but didn’t quite make the 0.9% level anticipated by the markets.

The services sector contributed the largest increase to today’s GDP reading, showing 0.9% growth. The production sector added 0.8% to the GDP numbers, construction was responsible for 0.3% while the British agriculture sector showed a contraction, taking 0.7% away on the quarter.

It is clear from this breakdown where the UK’s growth is coming from, it is further evidence that this recovery is a consumer lead one. While nothing much was anticipated from the farming sector of the economy, the lacklustre contribution of the construction sector stands out.

Britain, as warned by the International Monetary Fund recently, needs to broaden the base of sectors impacting the economic recovery. Investment has been noted as lacking both in manufacturing and more importantly in infrastructure. Government spending on capital projects has been somewhat overlooked as the British economy gets back on its feet following the crises.

This perhaps is a side effect of the aggressive target to control government debt, if so it appears to be a little short sighted, infrastructural projects tend to have a positive return on investment particularly in times of low interest rates and high unemployment.

It is unlikely that the breaking of 3% GDP growth milestone in itself will cause a change of policy at the Bank of England (BoE) the Bank has been anticipating Q1 growth of approximately 1.0% since late last year and this is already factored into the Bank’s stance.

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