GDP growth tipped to show higher rise than expected in first quarter

There is an outside chance that official figures will show GDP expansion higher than the 0.3 per cent reported last month, economists have said.

An upward revision is possible due to additional data being available for March when the economy appeared to be staging a robust recovery.

There was disappointment in April when an initial estimate from the Office for National Statistics showed fragile Q1 expansion of 0.2 per cent following a rise of 0.4 per cent in the final quarter of 2009.

However, that first quarter number was subsequently revised upwards to 0.3 per cent thanks to a solid performance in manufacturing.

Most analysts expect this week's second revision of the data to leave the Q1 rate unchanged.

Howard Archer, chief UK economist at forecasting body IHS Global Insight, said growth had been "clearly held back" by the bad weather at the start of the year.

The odds, he argued, were for no change to the quarter-on-quarter result, nor the year-on-year drop in GDP of 0.2 per cent.

"While it is possible that growth in the first quarter could be revised up further (to 0.4 per cent, quarter-on-quarter] due to more data being available for March when the economy appeared to perform better, we believe this is unlikely," said Archer.

"We expect GDP growth to have picked up to 0.5–0.6 per cent in the second quarter as some of the weather-related loss in activity in the first quarter is made up," he added.

"Latest manufacturing data and survey evidence has been pretty robust overall."

The new Office for Budget Responsibility is forecasting growth of 1.2 per cent this year, rising to 2.3 per cent in 2011.

Archer said he expected GDP expansion to be limited to 1.1 per cent in 2010 and 1.8 per cent next year "as it is held back by the fiscal tightening really kicking in".

Others argue that Chancellor George Osborne's accelerated plan of public sector cuts and higher taxes could tip the economy back into recession.