Yesterday we predicted (along with most others) that GDP would be flat in the first quarter of this year. ONS instead gave us a much-needed upside surprise with a quarterly growth rate of 0.3% across the economy.
% quarter on quarter change
The UK's large service sector seems to have a had a good run over the past three months with output increasing by 0.6%. Excluding the quarter which included the effects of the Olympics, that's the best one for services since 2011q3.
Conditions in manufacturing, on the other hand, were still pretty weak. The headline was a quarter-on-quarter contraction of 0.3%. We don't get a lot of information about the economy from these first estimates, but we can tell that manufacturing had a particularly poor January - when output fell by 1.6%. A quick calculation would therefore suggest that February and March were rather better, with likely to have expanded in both months.
The overall number was consistent with our Business Trends Survey last month which showed a balance of companies seeing output and orders fall in the first few months of the year, but with expectations that this would start to pick in the second quarter.
So, does mean everything is looking up? It's good news, but the reality check is that the economy is the same size as it was 6 months ago. We see progress in manufacturing with companies looking for growth in new markets and focusing on innovation. But overall progress in the economy will need to be measured over several quarters. In the meantime the focus on growth enhancing actions from government must continue.