The FINANCIAL — The British economy was stronger than previously believed both in the first quarter of this year and throughout 2014, revamped official data showed on June 30, raising hopes of a bumper 2015, according to Nasdaq.
The Office for National Statistics said the U.K. economy expanded a quarterly 0.4%, an upgrade from a previous estimate of 0.3%. At an annualized rate, gross domestic product rose 1.5%, compared with an earlier reading of 1.2%.
Fresh official estimates also showed British gross domestic product grew 3% in 2014 as a whole, compared with a previous figure of 2.8%.
Revisions were mostly due to the construction sector being much healthier than statisticians had thought. Construction is just a small portion of the British economy–about 6% of total national output–but a largely unexplained plunge in activity had nonetheless made a dent in the nation’s growth.
The ONS said production in the construction sector fell much less during the first quarter than previously believed, as well as rising strongly throughout 2014, when earlier readings suggested output had dropped. Despite some changes in how data is calculated, the revisions were also due to late reporting by some companies, national statisticians said.
“It is clear that our plan is laying the foundations for economic security for working people,” U.K. Treasury chief George Osborne said in a statement Tuesday. “The economic plan we’ve pursued in Britain these last five years has increased our resilience.”
Nevertheless, the ONS confirmed a weak manufacturing sector performance during the first quarter as the extraction industry in the British North Sea was hampered by ultra-low oil prices in the global markets, but also because the U.K.’s powerhouse service sector–about 80% of the economy–had a disappointing three months. This led the economy to slow into 2015.
Trade was also an increasingly large drag on economic growth, the ONS said, as business surveys show companies struggle to sell abroad due to the strength of the pound. But figures also confirmed household expenditure and business investment grew at a healthy pace.
Indeed, economists are upbeat about Britain’s prospects during the remainder of the year. A survey by market-research firm GfK Group showed Tuesday that consumer confidence in the U.K. rose in June to its highest level in more than 15 years. According to GfK, households were reported extremely willing to undertake major purchases such as furniture or electrical goods. Since they involve careful planning, these large purchases are usually a good gauge of consumer sentiment.
Analysts are hopeful this data show the economy has started picking up steam following the national election. Although the vote provided the center-right Conservative Party with a clear victory, polls released during the campaign led to believe that an unstable Parliament was a likely outcome, which likely drove consumers and businesses to delay spending and investment.
This is joined by a recent boost to living standards, both because of fatter pay checks and subdued growth in consumer prices, as cheap oil has put a leash on inflation around the world. When compared to inflation, rises in regular pay for British workers in April were the fastest in almost eight years, after a sustained period of declining living standards.
However, some other signs ring less positive for households in the U.K. According to the ONS, each Briton had broadly the same amount of money left to spend after taxes and inflation during the first quarter than they had in the last quarter of last year.
Also, compensation of employees, which includes both pay and pension contributions, fell 0.5% during the first quarter, official figures showed, while profits of companies rose a powerful 3.5%. Since mid-2014, wages had increased at a faster pace than corporate surpluses.
Official figures also suggested that consumers may be running down their savings in order to keep spending. The household savings ratio, which estimates how much of their disposable income families save, fell to 4.9% during the first quarter, the lowest since the third quarter of 2008.
Other woes could derail prospects for stronger growth throughout 2015. Economists remain puzzled at the U.K.’s lackluster productivity growth, which is a key gauge of its long-term health. The possibility of Britain leaving the European Union is another source of instability that could start unsettling markets in the near future, after Prime Minister David Cameron promised to hold and in-out referendum on EU membership.