Poor performance by services sector hampers recovery

The pace of economic recovery has slowed with gross domestic product rising by 0.2% between January and March.

This is the first estimate for Q1 GDP growth from the Office for National Statistics and reflects slower economic growth compared with a rise of 0.4% in Q4 2009.

The ONS says the weaker growth was driven by a poorly performing services sector, and in particular distribution, hotels, and restaurants which fell 0.7% in Q1, compared with an increase of 1.9% in the previous three months.

Business services and finance rose 0.6% in the first three months of the year, with banking and research contributing most to the rise in growth.

Charles Davis, senior economist at the Centre for Economics and Business Research, says: “The Bank of England is in the uncomfortable position of above target inflation and weaker growth.

“We expect growth to accelerate a touch in Q2 as the boost from a weaker pound drives growth in exports. But with record public sector borrowing, the key factor ahead is the extent of post-election fiscal consolidation.”