31st March 2015
The UK economy grew at a faster pace than previously thought in the final quarter of 2014, while consumer confidence reached a 12-year high this month, new figures reveal.
Economists had forecast no change to last month’s first estimate, but Q4 growth was revised up from 0.5% to 0.6%. This means GDP expanded by 2.8% in the year as a whole, compared with the earlier estimate of 2.6%, according to figures released by the Office for National Statistics.
This is the fastest annual growth since 2006, and confirms the UK as the fastest-growing of the G7 economies.
Ben Brettell, senior economist at Hargreaves Lansdown, said: “The ONS said the revision was mainly down to stronger household spending and a rise in exports. Consumer spending is expected to continue to drive the economy in the coming months, with CPI inflation expected to stay close to zero for the rest of the year meaning a modest rise in real wages.
“Indeed today’s data showed real household disposable income increased 2.3% percent compared with a year ago, the fastest since 2010. Further data from market research firm GfK showed UK consumer confidence hit a 12-year high this month, again ahead of economists’ forecasts.
“Given the outlook for consumer spending, the Office for Budgetary Responsibility’s forecast of 2.5% for 2015 looks a touch pessimistic, and could come under some upward pressure in the coming months.”
Andy Scott, associate director of foreign exchange advisory services at HiFX, adds: “Sterling strengthened following stronger-than-expected consumer confidence for March, which hit a 12-year high, and an unexpected upwards revision to Q4 GDP quarterly and annualised growth. Today’s figures show that the economy ended 2014 on a slightly stronger than expected note, with household spending a big contributor to growth, and it continues to be well supported in 2015 by households who are seeing disposable income rising, boosting sentiment.
“Concerns over slowing house price increases and the General Election don’t seem to be fazing consumers who are seeing real term wage growth for the first time recently in the past few years, thanks to significantly lower energy costs. This bodes well for the overall picture of the UK economy since individual spending affects so many industries – from coffee houses to DIY chains.
“Sterling hit a day high of 1.3750 against the euro which was weakened by news of a German lender needing rescuing, and 1.4790 against the dollar following the GDP release.”