Real GDP grew by 0.8% in the European Union compared to 0.2% in the previous quarter, with Germany leading the charge at 1.5%, France produced 1.0% and the United Kingdom at 0.5% balancing out the 0.5% contraction the previous quarter.
Fionnuala Earley, UK consumer economist at Royal Bank of Scotland, said the final Q1 figure is still one estimate away, but worries remain on the construction sector.
“One of the key issues for the economy is the drag on housing and the household sector with consumers really being squeezed by factors like Mervyn King’s predicted 15% rise in gas bills,” she said.
“People will be sitting tight, refusing to spend and that will be a drag on the economy. On the upside, interest rates will stay lower for longer with any movement happening slowly.”
RBS continues to predict an August rate rise, although its view is under review shortly.
“I think there is a risk the rate will rise even in spite of these numbers. There is the view that a 0.25% rise now would be better than a 1% rise in six months time,” she said.
GDP in the OECD area continued to grow at a rate of 0.5% in the first quarter of 2011 despite a continued contraction in Japan and slower growth in the United States as growth in most major European economies and Canada accelerated strongly.
Among non-European countries, GDP in Canada grew by 1.0%, up from 0.8% in the previous quarter. In the United States GDP slowed to 0.4% compared with 0.8% in the previous quarter. In Japan, GDP contracted by 0.9% following a 0.8% contraction in the previous quarter, partly reflecting the impact of the natural disaster of 11 March 2011.
Relative to a year earlier, GDP in the first quarter of 2011 expanded by 2.5% in the OECD area, down from 2.8% in the previous quarter. Among the seven major economies, Germany had the highest rate at 4.8% and Japan had the lowest at -0.7%.
