Consumer spending and business investment helped the UK economy to its longest stretch of growth since the financial crisis. Gross domestic product rose 0.3 percent in the first quarter, matching an initial estimate, the Office for National Statistics said in London on Thursday. It was less than the 0.4 percent increase forecast by economists however. While the economy has expanded for nine straight quarters the longest sprint since 2008, there is little sign of the shift away from consumer spending promised by David Cameron five years ago. The prime minister has pledged to use his surprise election victory this month to boost productivity.
“It confirms the picture of somewhat weaker growth in the first quarter than in recent ones,” said ONS Chief Economist Joe Grice. “But no single quarter’s figures should be given undue weight.” The figures are the first revision of GDP after Cameron took office with a Conservative majority in Parliament.
Consumer spending is being underpinned by zero inflation and rising wages. While the Bank is expected to maintain rates at a record-low after it meets next week, earlier rate rises could be back on the agenda for several monetary policy committee members if post-election certainty leads to strengthening in economic activity, economists say. Growth is expected to accelerate in the second quarter.
Applications for US jobless benefits remained below 300,000 for the 12th straight week, signalling the US labour market remains firm despite how slow the economy has been to rebound from a first-quarter slump.
Jobless claims increased by 7,000 to 282,000 in the week ended May 23, worse than the median forecast of 270,000. But Readings this low typically coincide with healthy levels of hiring.
Persistently low firings is a strong indication that businesses are planning for at least steady business demand. As joblessness approaches the Fed’s definition of full employment, employers might be pressured to boost wages in order to retain and attract workers. The US economy is starting to get over the first-quarter slump, when it barely expanded amid a stronger dollar, severe weather and a labour dispute at West Coast ports.
1:30pm - USD - Prelim GDP q/q forecast to fall from -0.8% to 0.2%
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