As expected, GDP growth in the first quarter was revised up from 0.2% to 0.3%. More importantly, the profile of output over the three months implies a strong starting base for the second quarter.

The chart shows quarterly GDP together with a monthly estimate based on services and industrial production, which have a combined weighting of 93%. After a 0.7% fall in January, partly reflecting weather disruption, monthly GDP rose by 0.6% and 0.7% respectively in February and March. The March reading was 0.6% above the quarter average.

GDP inflation, meanwhile, picked up further last quarter. The deflator for gross value added (GVA) at basic prices – which fully adjusts for the VAT hike and may therefore understate the underlying trend – rose by 1.0%, or 4.0% annualised.

Nominal GVA expansion, therefore, accelerated from 3.6% annualised during the second half of 2009 to 5.1% in the first quarter. Such a growth rate, if sustained, is unlikely to be compatible with the 2% inflation target over the medium term.