The UK economy grew faster than previously estimated in the first quarter, helped by stronger household spending, according to official data that suggests the next prime minister could benefit from a steadier recovery.
GDP increased by 0.7 per cent in the first three months of 2024, revised up from a first estimate increase of 0.6 per cent, the Office for National Statistics said on Friday.
This was the fastest growth since the end of 2021 and ended last year’s technical recession. It was also the highest of any G7 country.
“The upward revision to Q1 GDP suggests whoever is prime minister this time next week may benefit from the economic recovery being a bit stronger than our already above-consensus forecast,” said Paul Dales, economist at Capital Economics. He added that growth in 2024 as a whole “may be more likely to come in a bit above our existing forecast of 1 per cent”.
The revision comes less than a week ahead of the general election. In the polls the Conservatives trail Labour by about 20 percentage points.
However, monthly figures released earlier in the month showed the economy reported zero growth in April as wet weather weighed on activity.
The revision to the first quarter figures was due to stronger than initially estimated growth in consumer spending, up to 0.4 per cent from 0.2 per cent, and from a larger contribution from net trade. However, government spending grew less than previously thought.
Last week, the Bank of England said it expected the solid growth seen at the start of the year to continue in the second quarter for which it forecast an expansion of 0.5 per cent, up from the 0.2 per cent expected in May. However, for the remainder of the year, the central bank expected a slower pace of underlying growth, of about 0.25 per cent per quarter.
The ONS data showed that GDP per head, a measure of living standards, rose 0.5 per cent quarter on quarter. This was faster than the 0.4 per cent initially estimated and ended seven quarters of contraction. However, the measure was still 1.3 per cent lower than in the first quarter of 2022, reflecting how the economy struggled in the past two years amid elevated inflation and rising borrowing costs.
Real household disposable income grew for the second consecutive quarter by a strong pace of 0.7 per cent, boosting saving rates to 11.1 per cent, the highest since the second quarter of 2021.
This could support growth next year as higher confidence might lead consumers to spend more of their savings.
However, the performance of the UK economy over the past few years remains weak.
Compared with the fourth quarter of 2019, before the pandemic, the UK economy grew only 1.8 per cent, the second weakest in the G7 after Germany and well below the 8.6 per cent expansion in the US.
Adam Corlett, economist at think-tank Resolution Foundation, said: “The last five years have been terrible for living standards growth.
“Income growth over the parliament so far has been worse than in any other since the 1950s, and the third worst in post-Edwardian Britain.”
This article was written by Valentina Romei from The Financial Times and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.