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Friday, 26 April, 2002, 08:57 GMT 09:57 UK
UK economy edges forward
High Street shoppers and discount signs
Retail spending is propping up growth - but may be slowing
Economic growth in the UK was 0.1% in the first three months of this year, official figures have shown.

The weak growth figure seems likely to confirm fears that the UK economy is still far from the economic recovery forecast by the chancellor in his latest Budget statement.

Although the growth rate compares favourably with zero growth in the previous three month period, it was lower than economists were expecting.

The consensus forecast was that the UK economy would grow by 0.4% between January and March 2002.

Service sector slackens

The news makes it less likely that the Bank of England will raise interest rates in the next few months, despite suggestions from some economic forecasters, including the OECD club of rich nations, that rates were likely to rise soon.

Output in the service sector, which makes up the bulk of UK plc, was flat, while manufacturing output sagged.

The service sector grew by 0.5%, unchanged from the previous three months; compared to the same period of last year services grew 2.5%.

Growth in services was heavily dependent on High Street spending. Growth in the distribution, hotels and catering category was "a result entirely of strength in retail output," according to the Office for National Statistics (ONS).

However, retail sales figures for March have shown a slowdown in High Street spending.

More pain for industry

Britain's manufacturing output declined across all major sectors, the ONS said.

"The output of the production industries is estimated to fall sharply once more," in the first quarter, according to the ONS.

"The source of the disappointment is very much on the production side of the economy," said Simon Rubinsohn, an economist at stockbrokers Gerrard, though the service sector's performance was also below par.

"We could have expected better" from service industries, Mr Rubinsohn added.

The British Chambers of Commerce warned that "the recovery should not be taken for granted in the next few months" and called for interest rate rises to be put on hold.

London's FTSE 100 share index, which was already having a lacklustre day, hardly flickered in response, continuing to trade about 0.3% lower on the day.

The FTSE 100 was down 17 points at 5,180 at 0856 GMT.

The pound dipped on the news. The UK currency was trading at 1.452 to the dollar at 0902 GMT compared with 1.454 beforehand.

See also:

25 Apr 02 | Business
UK sales boom fizzles
27 Mar 02 | Business
UK growth below target
14 May 98 | Business Basics
GDP, GNP - a basic guide
27 Mar 02 | Business
UK economy 'to slip behind peers'
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