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Cameron hails quarterly rise of 0.5% but official figures show economy has hit plateau since last summer Britain’s recovery stalled over the last six months, according to official figures that showed key sectors of the economy struggled to make up lost ground after last year’s snow-induced shutdown. A lacklustre rise in GDP of 0.5% in the first three months of the year reversed a fall of 0.5% in the last quarter of 2010, to leave the economy with zero growth since last September. A sharp slowdown in the construction sector, which slumped 4.7% in the quarter, was the main reason. The services sector, which makes up 75% of the economy, grew by just 0.9%. Manufacturing, which grew at 1.1%, was the best performer. The Office for National Statistics said its analysis of figures stretching further back showed that the underlying trend for the economy had plateaued since last summer. In the House of Commons, the prime minister, David Cameron, dismissed critics of the government’s handling of the economy and hailed the positive growth figure as a sign of the economy’s improving health. Speaking at prime minister’s questions, Cameron said it was “clearly a success that the economy has grown”. He told MPs the opposition was talking down the economy to justify its warning of a double-dip recession. Cameron, who pointed to the positive news from the manufacturing sector and private sector job growth, demanded Labour leader Ed Miliband apologise. Labour said a closer study of the ONS data showed the coalition’s first budget last June had undermined business and consumer confidence after it jettisoned plans for growth in favour of spending cuts. Miliband accused the prime minister of “terrible complacency”, adding that the chancellor, George Osborne, was wrong to tell the cabinet on Tuesday that the economy was “on track” when he knew it would fall short of the 0.8% growth predicted last month by the Office for Budget Responsibility. “It’s not me who is talking down the economy – it’s your austerity rhetoric that has led to the lowest levels of consumer confidence in history in this country,” he argued. Several economists added their voices to fears that businesses were preparing for a difficult year as spending cuts began to bite and exports markets slowed down. A survey by GfK NOP found that consumer confidence in April fell to its lowest level since mid-2008 – in the midst of the banking crisis. Echoing previous surveys of household spending, the poll found a dramatic fall in the number of respondents prepared to make spending commitments over the next six months. Spokesman Nick Moon said: “Coming after six months of stagnant economic growth, this is a significant drop. It suggests that attempts to spur growth in last month’s budget have failed to convince the public, and this may well be sorely felt on the already beleaguered high street.” The economies of France, Germany and other eurozone countries have already slowed, fuelling fears for British exports. Manufacturing figures this week pointed to a more muted growth rate over the next year. Social tensions could also be exacerbated by a lack of job opportunities, especially outside the south-east. Several measures of economic activity reveal a widening gap with the rest of the country. While pockets of the country dependent on manufacturing have prospered as businesses exploit the low pound and turn to export markets for growth, large parts of the country could be described as still in recession . Ian Brinkley, of The Work Foundation, said the lack of growth would affect job creation over the next few months, “making any hope of an early reduction in unemployment remote”. John Hawksworth, chief economist at the accountants PricewaterhouseCoopers, said the risk of a double dip recession had increased. “The figures show that the UK is still teetering on the edge of a double dip recession and, in these circumstances, it would be premature in our view for the Bank of England to raise interest rates in the near future while the recovery remains so fragile. With a big fiscal squeeze still only in its early stages, monetary policy needs to remain very loose to support the economic recovery,” he said. “At sector level, the picture is much more mixed. The business services and finance sector recorded healthy 1% growth in the first quarter and manufacturing also grew solidly by 1.1%, helped by stronger exports. But the distribution sector showed only very modest growth and the construction sector has plunged back into recession following a strong rebound in the second and third quarters of 2010.” A collapse in commercial building was the biggest factor dragging down the figures as construction firms found it difficult to generate new business following the loss of the previous government’s multibillion-pound schools building programme and a drop in demand for new offices and shops. A mortgage drought has also hit the housebuilding industry. With only a few major buildings under construction, mainly in the south east, the industry is struggling to claw its way back from the worst recession since the early 1980s. Simon Ward, economist at fund manager Henderson, put a more positive spin on the figures, arguing that ONS figures showed construction orders were improving. He said without the drag effect from construction, the overall figures would reveal a healthier economy. Ward, like Bank of England interest rate setter Andrew Sentence, has consistently argued the economy is in better shape than the ONS figures show. He has called for interest rate rises to quell inflation, believing the recovery is entrenched and businesses well placed to withstand higher borrowing costs. Holidays hit growth While economists weighed the first quarter figures for signs of hope, experts faced the prospect of further volatility in the numbers for the current three-month period. One problem is the paucity of working days this month. How can the economy grow in the second quarter when there are only 18 working days? The royal wedding bank holiday and the mass exodus of workers linking Easter with May Day, usually a quiet time for long foreign holidays, could depress the figures. A similar extra day for the Queen’s golden jubilee in 2002 affected growth. The bank holiday might not show up in surveys of some sectors, but areas of the economy such as construction, which struggles to make up for lost time, can expect to suffer. In the fortnight before Christmas Britain lost several days to snow. British Airways suffered four days of closure at Heathrow while construction firms effectively shut down for the whole period. Snowfalls and ice conditions earlier in the month also contributed to a 0.5% fall in GDP, which the Office for National Statistics said would have been 0% without the adverse weather conditions. The loss of a few days to bank holidays will not have anything like the same effect, but with an estimated third of workers taking three days off work to gain a nine-day holiday, many of them jetting abroad, it could be a factor helping to depress growth. In addition, several large car makers such as Toyota, Nissan and Honda have all cut back on production this month because of shortage of parts caused by the Japanese tsunami. Economic growth (GDP) Economics David Cameron Ed Miliband George Osborne Phillip Inman guardian.co.uk