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Last Updated: Thursday, 25 May 2006, 09:25 GMT 10:25 UK
Consumer lull undermines growth
UK economic growth graph
The UK's economic growth figure for the first quarter has been left unrevised - but household spending is at its most weak in 12 months, a new report says.

Gross domestic product (GDP) grew by a steady 0.6% in the first three months of the year, the Office for National Statistics (ONS) has confirmed.

The figure pushed the annual rate of growth up to 2.2% from 1.8% in 2005.

But consumer spending was up just a sluggish 0.2% on the quarter, for an annual rise of 1.7%.

The solid rate of economic expansion is another indicator against further interest rate cuts.

The Bank of England's monetary policy committee will have to decide if the figure is strong enough to raise rates at its next meeting.

'Take cheer'

The UK consumer's willingness to spend has been a key ingredient in economic growth in the past few years.

However, the "paltry" gain meant household expenditure was now at its weakest level since the second quarter of 2005, said Gavin Redknap, economist at Standard Charterted Bank.

"If that remains the case, then the economic fortunes of the UK will rest in the hands of the recovery in the rest of Europe," he said.

But he said the the Bank of England would "take cheer" investment and export growth appeared to be on a sounder footing in the opening months of 2006.

In its Inflation Report this month, the Bank indicated that growth should stay close to its long-run average over the next three years, helped by steady expansion in consumer spending as a housing market revival continues.


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