"It is little surprise that consumption remains a significant driver of output growth, but the rise in business investment is a major plus and helps give the impression that the recovery is broadening out,"
- David Tinsley, an economist at BNP Paribas SA
Everyone is waiting for another upbeat report from the U.K. to heat up speculations the central bank should raise interest rates as soon as possible. The final GDP report was not expected to provide any surprises and was supposed only to confirm the earlier figures. Still, investors were hoping for an upside revision of the indicator. Nevertheless, the report from the ONS offered no surprises and British currency fell for the first time in six days versus the greenback. The Pound weakened against 14 of 16 major currencies.
British economy was driven by strong consumer spending in the first quarter, continuing a trend after they led the recovery during the last year. The overall economic output advanced 0.8% up from 0.7% three months earlier, receiving the strongest boost from a 0.8% increase in consumer spending, while business investment soared 2.7%, indicating the economy is slowly re-balancing. Additionally, the economy received a strong boost from the key services sector, which grew 0.9% over the observed period, contributing 0.7% to overall growth. The largest drag, however, was the net trade, which had a flat impact on GDP, following a 1% contribution in the preceding quarter. This was caused a 1% drop in exports, down from 2.8% a quarter earlier, as products were less competitive globally due to the strong exchange rate. The Bank of England now expects a 0.9% growth in the second quarter.
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