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Going is good for the economy - but how long will it last?

Let a thousand flowers bloom. Or at least 0.8 flowers. The latest measure of the economy shows that it grew by 0.8 per cent in the first three months of the year, and at an annualised rate of 3.1 per cent, which is the fastest rate since 2007 and a big relief to the chancellor, George Osborne.

Construction, a small but volatile sector, is up only 0.3 per cent. Credit: PA

I will be talking to him later today and I’ll eat my hat if he doesn't welcome the news with a formula along the lines of “this shows that the government’s long term economic plan is working.” He’s said something similar at every opportunity since I care to remember.

[in fact he already has].

(Ed Balls, the shadow chancellor will almost certainly counter that "voters are £1600 worse off under this government" [update: in fact he just has] – the political debate over the economy has reduced to predictable exchanges recently)].

Osborne will use the figures to say the government’s long term economic plan is working. Credit: PA

However, the growth figure is slightly slower than forecast (economists expected 0.9 per cent growth) and there are varied performances among the main sectors.

The huge service sector – which makes up over three quarters of all output, is up 0.9 per cent. Industrial production, key to rebalancing the economy from being so reliant on services, is up 0.8 per cent – it contributes about 15 per cent of output. Both sectors are in line with expectations.

Industrial production is up 0.8 per cent. Credit: PA

However construction, a small but volatile sector, is up only 0.3 per cent. That’s lower than forecast and the main reason GDP growth is lower than most economists expected. But, the ONS warns that, while there’s some evidence companies were hit by the bad weather and floods at the start of the year, it doesn’t see this as having a significant impact on the headline number.

Sterling has taken an immediate knock. Credit: PA

Agriculture is down 0.7 per cent but the sector is so small that the fall doesn't have any impact on the overall figure. Sterling has taken an immediate knock which shows that the market thinks this slightly lower GDP number means the Bank of England is likely to put up interest rates later rather than sooner.

Six years after the financial crisis hit and knocked the economy into recession, Britain’s GDP is within a whisker of where it was in 2008 - only 0.6 per cent smaller – and will surely break into new ground in the second quarter of this year. So the going is good for now. The big question is whether it will last. Most economists expect the pace to slow down a little in the coming months but with solid growth for the year.