This morning’s strong growth figures will ‘blow away’ talk of a UK recession, points out the BBC’s economics editor Faisal Islam. Today’s GDP reading is “very good news for the economy”, reports Professor Costas Milas, of the University of Liverpool’s Management School. He tells us: GDP grew (quarter-on the same quarter of the previous year) by 1.3% which is higher than the BoE’s estimate of 1.2% based on their latest Monetary Policy Report. This creates a momentum which should revise growth forecasts for 2025Q2 upwards. Based on my own estimates, GDP in 2025Q1 is around 0.8% below capacity (or equilibrium output). Consequently, the risk for inflationary pressures is quite low and therefore, the MPC can proceed with further interest rate cuts as soon as next month if they decide to do so. The only downside? Today’s GDP reading covers the period before Trump’s Liberation Day (which initiated trade wars). Chancellor Rachel Reeves has hailed today’s growth figures, pointing out that the UK expanded faster than other major economies in January-March. But … Reeves is also cautioning that there is ‘more to do’: She said: “Today’s growth figures show the strength and potential of the UK economy. “In the first three months of the year, the UK economy has grown faster than the US, Canada, France, Italy and Germany. “Up against a backdrop of global uncertainty we are making the right choices now in the national interest. “Since the election we have already had four interest rate cuts, signed two trade deals, saved British Steel and given a pay rise to millions by increasing the minimum wage. “Our plan for change is working. But I know there is more to do and that is why I’m determined we go further and faster to make working people better off.” Britain has outpaced major international rivals for growth in the first quarter of this year, by accelerating in January-March. The UK’s 0.7% growth in Q1 2025 shows it was the fastest-growing economy in the G7 during the last quarter – a clear boost for the government this morning. In contrast, the eurozone only grew by 0.4% in the last quarter, while US GDP contracted slightly due to a surge of imports to beat Donald Trump’s trade war. Now, we don’t get Japan’s GDP report until tomorrow morning (a small contraction is expected), and Canada’s data is only an early estimate. But as things stand, here’s the G7 growth league table: UK: +0.7% growth Canada: estimated to have grown by 0.4% Italy: 0.3% growth Germany: 0.2% growth France: 0.1% growth US: -0.075% (or -0.3% on an annualised basis) Japan: reporting tomorrow, -0.1% forecast At 0.7%, the UK’s quarterly growth rate has hit its highest level in a year – since the end of the 2023 recession. On an annual basis, real UK GDP is estimated to have increased by 1.3%, compared with the same quarter a year ago. The UK economy also grew if you adjust for population changes. The ONS reports that real GDP per head is estimated to have grown by 0.5% in Quarter 1 2025, following two consecutive quarterly falls. Here’s ONS director of economic statistics Liz McKeown explaining why the UK economy grew by 0.7% in the first quarter of the year: “The economy grew strongly in the first quarter of the year, largely driven by services, though production also grew significantly, after a period of decline. “Growth in services was broad based, with wholesale, retail and computer programming all having a strong quarter as did car leasing and advertising. These were only slightly offset by falls in education, telecoms and legal services.” More good news: the UK economy kept growing in March. Defying forecasts of stagnation, monthly GDP is estimated to have grown by 0.2% in March 2025 because of growth in the services and construction sectors. This follows an unrevised increase of 0.5% in February 2025 and an unrevised no growth in January 2025. Newsflash: The UK economy expanded by 0.7% in the first three months of this year, new data shows. The Office for National Statistics reports that growth accelerated in the January-March quarter, up from 0.1% in October-December. Services (+0.7%) and production (+1.1%) both grew, while construction (0.0%) was flat, the ONS says. That’s good news for the Labour government in its push for growth, following criticism that last autumn’s tax-raising budget would hurt the economy. It’s also slightly stronger than City economists had expected. Today’s GDP report could spur economists to revise higher their forecasts for growth this year higher. Economist Julian Jessop explains: Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy. Britain’s economy is under the microscope today, as we eagerly await the first estimate for UK GDP for the first quarter of the year. Economists are expecting to learn that growth picked up in the January-March quarter, after a weak end to 2024. GDP is forecast to have risen by a relatively pacy – by recent standards – 0.6% in Q1 2025. That would be rather quicker than the sluggish 0.1% recorded in October-December 2024. A pick-up in growth would be warmly welcomed by chancellor Rachel Reeves, as it might indicate that the government’s push for higher growth was finally getting moving. However, last week the Bank of England cautioned that “erratic factors”, such as disruptions to manufacturing output at the end of last year, would inflate headline GDP growth in this quarter. Growth data for March alone will also be released at 7am – it’s expected to show that GDP stagnated in the month, after a strong February (data last month showed 0.5% growth). GDP data always gives a ‘rear view mirror’ of the economy, but today’s data feels particularly historic – as it covers the period just before “Liberation Day”, when Donald Trump launched his trade war at the start of April (before a flurry of backtracking on tariffs). Michael Field, chief equity strategist at Morningstar, sets the scene: “UK GDP is expected to be flat in March, meaning a year over year rise of 1%, not blow-out, but growth nonetheless. Investors will be able to place a little more faith in the trajectory of growth in the UK now that a trade deal has been agreed with the US and the risk of exorbitant tariffs has been removed. But inflation, at 2.6%, is still outpacing growth by some measure, and some areas of the economy like manufacturing and industrial production are expected to have gone backwards over the last 12 months. The agenda 7am BST: UK GDP report for Q1 2025 7am BST: UK trade balance report for March 9.30am BST: UK labour productivity report for Q4 2024 10am BST: Eurozone employment and GDP reports for Q1 2025 1.30pm BST: US weekly jobless claims report 1.30pm BST: US retail sales report for April 1.30pm BST: US producer prices index (PPI) for April 1.40pm Jerome Powell speech (Framework Review at the Thomas Laubach Research Conference, Washington DC) 3pm BST: Swati Dhingra: Speech at the New Economics Foundation conference ‘EU macroeconomic policy in an age of shocks’, Brussels
Author: Graeme Wearden