At any other time the GDP figures released by the Office for National Statistics (ONS) this morning would have come as a huge relief for Keir Starmer and Rachel Reeves. They show that the economy grew unexpectedly by 0.3 per cent in March.
When February's figures were published a month ago showing impressive monthly growth of 0.5 per cent (revised down to 0.4 per cent in the latest release) it was widely interpreted as looking back on a lost age, prior to the beginning of the Iran war on 28 February. Now, however, it seems as if the uptick in growth has survived the surge in oil prices.
In services, growth was 0.3 per cent and in construction, 1.5 per cent. There was a small fall, however, in output in the production sector, to the tune of 0.2 per cent. If consumers are cutting back, it seems to be in arts, entertainment and leisure, where output was down 2.2 per cent over the month. The quarterly figure, which is less volatile because there is more data involved, shows growth of 0.6 per cent higher in the first quarter of this year compared with the fourth quarter of last year.
Overall there is a very positive story being told by the GDP figures
In one sense, the figures are even better than they at first suggest. Thanks to a fall in immigration, the population has been growing more slowly than it has done for much of the past few years. As a result, GDP per capita is like to show healthy growth once we have accurate population figures for the period.
There is a nasty sting, however. While the ONS figures show healthy growth in GDP, this does not seem to be translating to the bottom line of most businesses. A survey published to accompany the GDP figures reports that 27 per cent of trading businesses reported a decrease in turnover in March, compared with 13 per cent reporting a rise and 52 per cent reporting no change. While the economy is finally growing, many businesses continue to be beaten back by taxation and regulation.
There is also the question of whether there will be a delayed reaction to the Iran war. If, say, a rural household reacted to the surge in heating oil prices by filling the oil tank for fear prices would rise further, that would show up as an increase in economic activity in March. But it probably signals a downturn in activity in coming months as households draw in their horns.
But overall there is a very positive story being told by the GDP figures. It is just a shame for Keir Starmer and Rachel Reeves that they might not be in office much longer to enjoy it.
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