Britain’s economic sprint probably tripled U.S. growth in Q1
This time last year, analysts and investors were nearly unanimous in their expectation for a whole lot of nothing from Britain’s economy which, after a valiant leap higher from a spectacularly successful 2012 Olympic Games hosted in London, was back to just bumping along.
Now the UK is looking to clock the best sprint in the G7 for the first three months of a year – and by a wide margin.
The Reuters poll found a consensus for 0.9 percent growth in the UK in the first three months of the year on the quarter before. That would be the best in nearly four years, and just slightly below the Bank of England’s newly upbeat prediction. The data are due on Tuesday.
What’s all the more astonishing is that not only would that be the best expected growth rate in the G7, trailed by Germany at 0.6 percent, but it is triple the equivalent growth rate forecast for the United States.
Poor performance for the U.S. has already been blamed by analysts and the Fed alike on terrible winter weather that pounded the U.S. northeast and stretched beyond the normal geographic boundaries of winter. A rebound from that weakness is already taking hold.
But when you consider that Britain had its own horrific month of January, where its coasts were lashed by Atlantic storms and flooding damaged thousands of properties, the expected growth rate for the UK is all the more surprising.
Allan Monks at JP Morgan reckons that the weather-related drag on Q1 GDP in the UK was marginal, less than 0.1 percentage point. Growth is forecast to come from all sectors of the economy: services, manufacturing and construction.
Neither the rising pound – the crutch of many a British economic commentator – nor a languid euro zone, where policy makers are only now considering printing money to revive its fortunes and stop deflation from taking hold, seems to have mattered much.
One thing to consider, however, is that the UK, which was hit hard by the financial crisis, is still playing catch-up with some of its peers. Its economy is still smaller than its pre-recession peak in early 2008 – a milestone Germany and France surpassed years ago.
What is also very different from this time last year is the price of British houses. They are up nearly 10 percent on a national average and 20 percent in London. That may go on for a while, but recent experience shows that can’t go on forever.