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Economic figures give mixed message

The economy grew at its fastest pace since 2006 last year according to revised official figures that showed growing exports helped boost performance in the final quarter.

But figures from the Office for National Statistics (ONS) showed the annual current account deficit widening to a record level while separate monthly data revealed a slowdown in the UK's dominant services sector in January.

One economist predicted that a sluggish start to 2015 could herald a disappointing set of growth figures for the first quarter, due to be published a week ahead of the general election.

Today's data showed GDP rose by 2.8% in 2014, up from a previous estimate of 2.6% and accelerating from the rate of 1.7% the year before.

It confirmed the UK as the fastest growing of the G7 major advanced economies.

Annual growth was last stronger in 2006 when it was 3%.

GDP grew by 0.6% in the final quarter of 2014, up from a previous estimate of 0.5%, helped by a strong contribution from trade, as export growth was revised up strongly.

Third quarter growth was revised down slightly but the figures also showed expansion for the first three months of last year revised up to 0.9%, the best quarterly rate since the middle of 2010.

Chancellor George Osborne hailed the figures, writing on Twitter: "GDP revised upwards from 2.6% to 2.8% for 2014. Confirms UK as clearly fastest growing major advanced economy."

But shadow chancellor Ed Balls said: "This is the slowest recovery for 100 years and the Tories have failed to deliver the sustained rises in living standards they promised."

The figures also showed GDP per head grew by 2.2% in 2014.

This is seen as a key measure because it indicates that the size of the economy per person is growing even as the population expands. But it remains 1.2% below levels before the economic downturn.

The ONS also said household spending grew by 0.6%, or £1.6 billion, in the fourth quarter, though this was a slowdown on the previous quarter.

There was a 0.9% slump in business investment in the last three months of 2014 but this was better than a previous estimate of a 1.4% decline.

Britain's current account deficit narrowed in the period as exports grew but for the year as a whole it increased to £97.9 billion, up from £76.7 billion in 2013. It is now 5.5% of GDP, the highest percentage level since records began in 1948.

This rise was mainly due to UK earnings on investment abroad decreasing and foreign earnings on investment in the UK increasing. For the year, export growth slowed while imports accelerated.

Meanwhile separate ONS data showed the dominant services sector, which represents three quarters of output, shrank by 0.2% in January.

Scotiabank economist Alan Clarke said that combined with disappointing data so far from the construction and industrial production sectors, it suggested that GDP growth could post a slowdown to 0.4% or 0.5% for the first quarter.

The ONS first estimate of growth for the period will be published on April 28, just over a week before the General Election on May 7.

Mr Clarke said: "The lower oil price is going to give growth a boost but we are probably going to have to wait for Q2 for that to have happened and by that time the next government will be in power."

Vicky Redwood, chief UK economist at consultancy Capital Economics, said the latest figures "leave the economic recovery at the end of last year looking a bit stronger than before, although the large current account deficit casts something of a cloud".

Howard Archer, chief UK and European economist at IHS Global Insight, said the Conservatives and Liberal Democrats would welcome the GDP upgrade.

But he added: "Any prolonged political uncertainty following May's General Election would be liable to at least temporarily weigh down on growth, particularly through leading to increased business caution over investment."

David Kern, chief economist at the British Chambers of Commerce, said: "While the upgrade in growth is positive, some of the details are concerning and highlight the need to shift our economy towards a more sustainable model.

"As in recent quarters, services and consumer spending were the main drivers of the economy. But while a healthy consumer sector is vital to the UK economy, it is clear we need a greater contribution from exports and investment."

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