The figures, from the Office for National Statistics, showed that the manufacturing and services sectors performed well during that time, but that construction output fell sharply by 4.7 per cent.
Mr Cameron conceded that he was disappointed that the growth figure was less than the 0.8 per cent forecast by the Office for Budget Responsibility but said that the overall news was positive.
During PMQ, he said: “What is encouraging in the figures is that the British economy is growing once again, manufacturing is up, exports are up, and we are seeing a rebalancing of the economy so we are not over-reliant on private consumption."
However, Mr Miliband argued that the figures did not show good news, as the economy had contracted during the last quarter of 2010 by 0.5 per cent and so now this ‘growth’ was merely an evening out of the economy.
Other reactions to the figures have been equally mixed, mainly depending on whic side of the political fence one sits. And some commentators are urging caution in the interpretation of the figures, whether positive or negative.
Graeme Leach, Chief Economist at the Institute of Directors (IoD) said: “The preliminary GDP figures are a very mixed bag with grounds for both optimism and pessimism. Pessimists point to the fact that GDP is stagnant with output unchanged over the past 6 months…But the optimists can’t be ignored either.
He went on to say: “The more important figure will be Q2, when we begin to see the squeeze on real incomes really kick-in and what effect this has on consumer spending, together with the implementation of the public spending squeeze”.
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( 3 / 837 )Figures dues out later today will almost certainly show that the economy’s recovery is too weak to trigger a rise in the interest rate set by policy makers at the Bank of England.
The latest Reuters poll shows that analysts expect gross domestic product to have expanded by just 0.5 percent in the first three months of this year, barely making up for the 0.5 percent quarter-on-quarter drop at the end of last year.
This news, while better than a contraction, which could have brought a double-dip recession, is not good for the Government, as the spending cuts and tax rises brought in to decrease the record budget deficit, are just beginning to bite. And some economists are criticising the speed and severity of the cuts, saying that they are putting the economy’s recovery at risk.
However, the news will almost certainly mean that, as predicted, the Bank’s interest rate will not rise until at least August, with some experts predicting November as the earliest date that a hike will be implemented. Predictions, however, are based on so many different factors and on such uncertain data that it is very easy to get them wrong.
For example, analysts were taken by surprise at a 0.5 per cent fall in GDP in the last quarter of 2010. The contraction was blamed on heavy snowfall in December, which cut productivity and stopped a lot of construction work. Now, however, others are saying that, even without the snow, there would have been no growth.
Many were also taken by surprise at the fall in inflation in March, which probably stopped rise in the interest rate earlier this month, which had been strongly suggested to increase by at least 0.25 per cent.
And now, with a very late Easter and a day off for the Royal Wedding bringing more than usual down time in April, experts are saying that predictions for the second quarter of this year are no clearer either. Who forgot to pack the crystal ball?
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( 3 / 868 )This weekend has seen us munching our way through almost 80 million chocolate eggs – many of which have, admittedly, been on sale since Boxing Day. But what it is about chocolate, which makes it irresistible?
Firstly, it has been found that the same alkaloid compounds present in alcohol are also found in chocolate; secondly, researchers in Italy discovered that chocolate contains a pleasure-inducing compound called anandamide, as well as other substances believed to mimic the effects of marijuana. And thirdly, the cocoa butter present in chocolate melts uniquely at just below body temperature, yielding a highly sensuous mouth feel.
And science has also revealed something that many of us already knew – women seem to be more prone to chocolate cravings than men. The Diabetes Association report found that only 15 per cent of males appear to crave chocolate, while as many as 40 per cent of women do – and 75 per cent of them claim that absolutely nothing other than chocolate can satisfy their sweet craving.
But what has chocolate got to do with the price of eggs – or a business blog – we hear you ask? Well, the price of cocoa beans, the essential ingredient for chocolate, has doubled in the last five years and just before Easter was close to £2,000 per tonne.
The cause of the massive price hike has been political unrest in Ivory Coast, the world's largest producer of cocoa, meaning that up to 400,000 tonnes have been locked up in the country's docks since January. This blockade was lifted just before Easter, meaning that prices dropped, but that was far too late for any reduction for the consumer before our biggest chocolate spending ‘eggstravaganza’ of the year.
Projections show that, despite the cost of the beans, chocolate sales are set to rise by at least 13 per cent over the next four years, meaning that consumers are bucking the sales trend when it comes to satisfying their cravings or showing affection to their loved ones. We might not be buying luxuries in these austere times but some things transcend luxury and become necessities.
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( 3 / 558 )The pound fell sharply yesterday after the minutes of the Bank of England’s Monetary Policy Committee (MPC) were published. The minutes showed a continuing 6-3 against an interest rate rise, indicating that a hike is unlikely before the autumn.
"The minutes have been a little more dovish than some in the markets were expecting," said Sara Yates, a Forex analyst at Barclays. "The markets are looking at October/November for the next rate hike."
"Survey-based measures pointed to weak consumption of services in the first quarter," the minutes said. "The volume of retail sales had been broadly flat for some months. And surveys of consumer confidence had remained far below their historic average levels."
The fragility of consumer spending was the main contributory factor to the decision to leave the rate where it is. In the current circumstances, a rate rise would "adversely affect consumer confidence, leading to an exaggerated impact on spending", the MPC said. And evidence from the Bank’s regional agents, published with the MPC’s minutes, highlighted the changes in the way that people are spending.
"Dining out in restaurants had declined but demand for fast food continued to strengthen. And there was some evidence of a switch away from the use of private cars towards public transport," the agents said. There was also evidence that consumers are holding back on non-essential purchases.
Reaction to the minutes was swift and the FTSE 100 index recorded its biggest one-day points gain since last September. Giles Watts, head of equities at City Index said: "Intel kicked things off, with Asian markets posting gains of 1.6% and this continued into Europe."
However, some members, who voted for higher rates, believe a prolonged period of above-target inflation could become embedded in wage and price-setting if the Bank continues to ignore price growth.
“Waiting for this risk to crystallise before beginning to tighten monetary policy could be costly,” they warned.
But it looks as if we have several months yet to test the theory.
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( 3.1 / 634 )In case anyone had missed it, Prince William and Kate Middleton are to be married on April 29th. The day has been decreed a public holiday and an extra 600,000 tourists are expected to celebrate, along with the half million or so who are normally in the country.
These people all have to eat, drink and sleep somewhere, so hotels, restaurants, pubs and transport companies are hoping for bumper sales. And people who aren’t going out are almost certainly holding or going to parties locally, which means an increase in supermarket sales. Then there are the sales of memorabilia, which appear to be going through the roof.
Of course, many people aren’t interested in the royal nuptials, with some merely taking advantage of the extra day’s holiday in what is already a short month. Tour agent Thomas Cook has seen bookings for April surge by over a quarter, as people make a dash for ‘wedding freedom’, preferring to lie on a beach abroad.
And some business owners are concerned at the lack of productivity at a time when they may just be seeing an economic turnaround. Sara Lee, a spokeswoman for the Federation of Small Businesses said that while many of its members will benefit, especially those in retail, for others “it will have a negative impact, especially those with cash flow problems."
Every bank holiday costs around £6 billion in lost productivity and because April is awash with them, UK plc could lose up to £30 billion in the last two weeks of this month.
There will be additional cost to the country, as security is being tightened enormously over the weekend, which it is estimated could be over £30m but experts have called this a drop in the ocean compared with the extra revenue the wedding will bring, particularly to London.
Whatever one’s point of view, at a time when we are being urged to be happy by the Government, perhaps the 29th gives us all a day to try happiness in a variety of ways.
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