“These figures suggest a refreshingly resilient first quarter for the economy, though March’s surprisingly strong outturn is flattered somewhat by businesses bringing forward activity to guard against the turmoil triggered by the Iran war.
“While rising consumer spending and business investment suggest that some activity was revived as uncertainty eased following November’s Budget, the financial squeeze unleashed by the conflict means this improvement is likely to be short-lived.
“This strong first quarter is probably the high point for the economy this year with output likely to halve in Q2 as surging energy costs suffocate activity, despite a short-term boost from firms stockpiling in anticipation of shortages and price rises.
“A prolonged period of domestic political instability would cast another dark cloud over the UK’s economic outlook by further denting confidence and increasing financial market turbulence, likely resulting in notably weaker spending and investment.
“Though these figures may reinforce the more hawkish stance among rate-setters caused by the Iran war, a June rate rise still looks unlikely given lingering uncertainty over the conflict’s impact and hope that a weaker economy will eventually help limit inflation.”
ENDS
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