BLBG: U.K. Growth Weakens in Blow to Cameron in Tight Election Battle
U.K. economic growth slowed more than economists forecast in the first quarter, dealing a potential blow to Prime Minister David Cameron’s claim that his Conservative Party is best placed to manage the economy’s recovery.
The 0.3 percent pace was just half the rate of the previous three months and marked the weakest reading since the fourth quarter of 2012. Economists had forecast growth of 0.5 percent, according to a Bloomberg News survey. The pound weakened after the data.
With the May 7 election just over a week away, the release will be latched onto by politicians looking to sway voters with their economic credentials. Polls signal the Conservatives, who formed a coalition with the Liberal Democrats after the 2010 election, and the opposition Labour Party are neck-and-neck, with neither likely to win a majority in Parliament.
Chancellor of the Exchequer George Osborne said on Tuesday the continued growth in the quarter was “good news” and tried to turn the slowdown to his advantage. In a post on his Twitter feed, he said this is a “critical moment and reminder you can’t take recovery for granted.”
The pound stayed lower against the dollar and was down 0.1 percent at $1.5228 as of 10.21 a.m. London time. It’s fallen almost 6 percent against the U.S. currency in the past six months. James Knightley, an economist at ING in London, said sterling could remain under pressure because of political concerns.
Election Fodder
Since the last election, the economy has grown 8.4 percent, according to the Office for National Statistics. It has been a central part of the election battle, with Cameron citing falling unemployment as evidence that his economic plan is working.
“With me you keep the jobs, you keep the growth, you keep the security,” he told a campaign event in north London Tuesday. “Please think about the risks to our economy and to our future.”
Against that, Labour leader Ed Miliband has said the recovery hasn’t lifted living standards for most people. “While the Tories have spent months patting themselves on the back these figures show they have not fixed the economy for working families,” said Ed Balls, the party’s economy spokesman.
While Tuesday’s numbers will be used by politicians as election fodder, ONS Chief Economist Joe Grice warned against “reading too much into one quarter’s figures.” The data is based on about 44 percent of the information that will ultimately be available.
Services Slowdown
The slowdown “clearly won’t help the coalition parties,” said Vicky Redwood, an economist at Capital Economics Ltd. in London. “Nonetheless, we doubt that the recovery is on the cusp of a sustained slowdown. Indeed, the first-quarter figure could eventually be revised up.”
The slowdown in the first quarter was led by services, the largest part of the economy. It grew just 0.5 percent, the least since the second quarter of 2013. Within that sector, business services and finance rose 0.1 percent, the smallest increase since 2010.
Production fell 0.1 percent in the January-March period and construction dropped 1.6 percent. From a year earlier, the economy expanded 2.4 percent, the least in more than a year.
Forecasts in the Bloomberg survey ranged from 0.8 percent to 0.3 percent. Only two of 39 respondents, Goldman Sachs Group Inc. and Schroders Plc, correctly predicted the first-quarter number.
