GDP growth weak but steady at 0.3%

This is the second revision to estimates of GDP growth for the first quarter of 2010. The original estimate - published in April - stood at 0.2%. This was revised up by one percentage point - to 0.3% - when the first revised estimate was published one month later. The latest figure for GDP growth in the first quarter of 2010 is therefore unchanged from the previous estimate.

The ONS comments:

GDP increased by 0.3% in the first quarter of 2010, unrevised from the previous estimate. GDP in the first quarter of 2010 is now 0.2% lower than the first quarter of 2009. For the year 2009 as a whole, GDP contracted by 4.9%, compared with a fall of 0.1% in 2008.

It remains to be seen if economic recovery will be sustained, or if a double-dip recession might be in prospect. With global money markets volatile and economic recovery uncertain, Bank of England Monetary Policy Committee (MPC) member Adam Posen argues that the UK economy is in a precarious position, and that recovery could go either way (external website). Posen says:

With the strong recovery outside of Western Europe proceeding on one side, and the coming austerity at home and in the euro area on the other, I think the UK is still poised between two very different outcomes. The UK economy is potentially switching between two states - a recovery, which we are now in, albeit perhaps an initially weak one for the many widely discussed reasons; and the renewal of a severe recession if not outright deflation.

The Office for Budget Responsibility is, however, confident that recovery is on a sure footing. In its June 2010 Budget Forecast report (PDF format, 2.5MB) (external website) - published to coincide with Chancellor George Osborne's emergency Budget last month - the OBR predicted that GDP will rise by 1.2% in 2010 and 2.3% in 2011. It will then continue to rise slowly over the remainder of the period until 2015, but will not break the 3% barrier.

However, economic commentators have questioned the OBR's GDP forecasts. For example, Sunday Times economics editor David Smith describes the forecasts presented in the OBR Budget Forecast report as based on "an optimistic set of economic predictions" (external website). Smith continues:

There is no hint of anything remotely approaching a double-dip. If it all goes wrong, maybe the OBR will get the blame.

Perhaps more worryingly, the International Monetary Fund (IMF) has revised down its forecasts for UK GDP growth (external website). It estimates that UK GDP will grow by 1.2% in 2010 (down from its previous forecast of 1.3% published in April 2010) and by 2.1% in 2011 (down from 2.5% in April). The Telegraph reports (external website):

[T]he IMF cut its growth predictions for the UK by more than any other major country in the world and warned that "growth prospects in advanced economies could suffer if an overly severe or poorly planned fiscal consolidation stifles still-weak domestic demand".

Today's GDP data release was originally scheduled for publication on Tuesday 30 June 2010, but was delayed due to a "potential error" with the data (external website), uncovered by the Office for National Statistics (ONS). This means that the gap between this release of estimated GDP growth and the next is unusually short. Preliminary GDP estimates for the second quarter of 2010 are scheduled for publication next Friday (23 July 2010).