UK growth revised up
Meanwhile, the contribution from stockbuilding to Q1’s growth has been revised down, while net trade’s drag on GDP growth has been revised as smaller from 0.9% to 0.6%.
Samuel Tombs, senior UK economist at Capital Economics, said: “Granted, certain aspects of the recovery look unsustainable – households’ real incomes grew by just 0.2% in Q1, meaning that the 0.9% quarterly rise in real household spending was largely funded by a drop in the saving rate from 5.9% in Q4 to 4.9% in Q1, its lowest level since 2008.
“And the current account deficit looks even worse – Q4’s deficit was revised up to 6.4% of GDP, while the 5.8% reading in Q1 was larger than the consensus expected.
“But despite these weaknesses, we still think that the UK’s recovery could gain momentum over the coming quarters.
“Indeed, business surveys point on the basis of past form to quarterly GDP growth returning in Q2 to the 0.7% or so rate seen in 2014.
“And growth in households’ real incomes should pick up now that real earnings are growing at pre-recession rates. Accordingly, we still think that GDP growth this year could be very close to last year’s 3% rate, ensuring that the UK remains the fastest growing G7 economy for another year.”