Roundup: British GDP growth slows, possible blow to coalition ahead of election

British gross domestic product (GDP) was estimated to have increased by only 0.3 percent in the first quarter (Q1) of 2015 compared with growth of 0.6 percent in the fourth quarter of 2014, marking the slowest quarterly growth in two years, announced the Office for National Statistics (ONS) Tuesday.

Experts here reckon that the growth slowdown might be a blow to the Conservative and Liberal Democrat coalition as the general election is approaching, although the slowing would probably be temporary.

CRITICAL MOMENT

Nonetheless, the country's GDP was still 2.4 percent higher in Q1 2015 compared with same quarter a year earlier, data showed.

The service industry's output increased by 0.5 percent in the first quarter. However, the other three industrial groups' growth dwindled, with construction slipping by 1.6 percent, production by 0.1 percent and agricultural by 0.2 percent, said ONS.

In the first quarter, Britain's GDP was estimated to have been 4.0 percent higher than the pre-economic downturn peak of Q1 2008, figures showed.

George Osborne, British Chancellor of Exchequer, said via his Twitter account:" Good news. Economy continues to grow but this is a critical moment and reminder you can't take recovery for granted."

"GDP figures show future of the economy is on the ballot paper. We should stick to the plan that's delivering a brighter more secure future," he added, referring to the upcoming election on May 7.

It was the first Q1 estimate of Britain's GDP. The ONS will release two revised estimates at the end of the next two months respectively.

TEMPORARY BLOW

Vicky Redwood, chief UK economist at Capital Economics, said in an analysis piece: "With the general election just days away, the news that the economic recovery slowed sharply in the first quarter clearly won't help the coalition parties."

The main disappointment was the relatively weak 0.5 percent rise in services output, down from a 0.9 percent increase in Q4 2014, noted Redwood.

But the British economic analysis company believes that the slowdown is only "temporary", and the Q1's figures could eventually be revised up to 0.7 percent or 0.8 percent, given the rebound in real incomes, and high business and consumer confidence.

"The UK is still on course to see decent economic growth of between 2.5 percent and 3 percent this year," said Redwood.

Martin Beck, senior economic adviser to the EY ITEM Club, commented in a note that: "The prognosis for the UK economy looks pretty good."

The current environment of "noflation," the favorable investment conditions, the cash piles of corporate sectors as well as the signs of stronger activity from the eurozone would continue to support the country's growth, he noted.

But Mark Taylor, dean of Warwick Business School, said the GDP figures reflect underlying uncertainties in the economy as well as some structural weakness to the recovery.

"In terms of structure, the recovery has so far been led largely by household consumption, house prices, and growth in the service sector, none of which can be sustained into the longer term without a strong performance in investment, exports and manufacturing, all of which have been languishing," he said.

"General elections always create policy uncertainty, and this one more than most, and therefore it's not surprising that firms are refusing to commit to investment at this point," Taylor added. Endit