A rebound today will allay fears the consumer sector is continuing to struggle. The improvement in the housing market should bolster consumer spending.
While the data is on the face of it good, the weakness evident in this report suggests that the consumer sector remains weak. Mixed messages for the Bank of England.
The Bank of England will be comforted by a report which shows a remarkable degree of balance in the economy with manufacturing reviving to contribute almost as much to growth as services. It won't alter their inclination to leave rates on hold for now.
Brown will hope that his performance (on Wednesday) will help to change the public's perception of him from stern chancellor to benevolent potential future prime minister.
It's very bad news. Numbers such as this put a dent in the view that exports can pick up to counter a slower consumer sector. Growth this year isn't going to be that great.
Should consumer services start to reinvigorate as anecdotal evidence suggests, the outlook for the sector as a whole should improve substantially. The data is very much consistent with the Bank staying on hold next week.
We still see lower rates later in the year, but for now, with the economy growing at about trend and in a balanced manner, there are few reasons for policy to be altered in either direction.
The minutes indicate a majority that feels satisfied with the current economic climate. The Bank noted inflation and inflation expectations remained anchored. Meanwhile growth had already picked up to its long-term average, and was likely to remain there in the next few quarters. Today's GDP release certainly confirmed the former point.
Wednesday's annual Budget could be Brown's last.
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