Opponents duel over growth figures
The UK economy grew at its fastest pace for seven years in 2014 but the pace of expansion slowed more sharply than expected in the last three months, official figures showed today.
Britain's gross domestic product (GDP) rose by 2.6%, matching its pre-recession performance in 2007 and putting it on course to have been the world's fastest growing major economy last year.
However it lost momentum in the fourth quarter, advancing by just 0.5%, according to the Office for National Statistics (ONS), and missing City expectations of 0.6%. It was the worst quarterly performance for a year.
The annual figure was welcomed by Chancellor George Osborne who said it showed the recovery was on track though he warned of the worsening global outlook and said the Government's plan was "protecting Britain from the economic storm".
He added: "With 100 days to go until the election now is not the time to abandon that plan and return Britain to economic chaos."
Prime Minister David Cameron said on Twitter: "Today's GDP growth figures show our long term economic plan is working. In 100 days the country faces a choice between competence and chaos."
But shadow chancellor Ed Balls pointed to the "concerning slowdown" driven by a sharp contraction in the construction sector and said Conservative claims about the economy would "ring hollow" with working people.
It was the second consecutive quarter of slowing growth, which was recorded at 0.7% in the third quarter and 0.8% in the previous period.
Economists said the figures showed growth remained too dependent on the consumer, with a hoped-for rebalancing towards industry stalling.
The annual figure beat 2013's expansion of 1.7% and looks set to put Britain ahead of the US, which reports its GDP result on Friday - with the International Monetary Fund (IMF) expecting growth of 2.4%.
But UK GDP for 2014 missed the forecast of 3% by the independent Office for Budget Responsibility (OBR) published last month at the time of the Chancellor's autumn statement.
ONS chief economist Joe Grice said it was "too early to say if there is a general slowing-down of the economy", with growth having been dragged back by "erratic" sectors such as construction, mining and energy supply.
In the fourth quarter, GDP was boosted by the dominant services sector, up by 0.8%, with the main contribution coming from retail - which is starting to benefit from rising real terms wages as inflation has fallen, pushing up consumer spending.
Manufacturing edged ahead narrowly by 0.1%, its slowest growth since the start of 2013, while construction shrank by 1.8%, its worst performance since the second quarter of 2012.
The economy is 3.4% above its pre-recession level at the start of 2008 and 7.8% bigger than at the time of the 2010 general election. The services sector has led the way but manufacturing and construction continue to lag behind 2008 levels.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The main disappointment with growth in the fourth quarter was that it looks unbalanced."
Samuel Tombs of consultancy Capital Economics said the halving in the oil price in recent months, expected to provide a boost in spending, should help the UK "regain some vigour in early 2015" pushing up growth to 3%.
"In short, the best days of the UK's recovery may still lie ahead," he added.
James Knightley of ING Bank said: "This is the eighth consecutive quarterly expansion, but is disappointing, hinting at a loss of momentum. The details show that the long heralded rebalancing story in the UK has completely stalled."
But he was cautious about suggesting the figures could push back the timing of an interest rate hike as recent comments by policy makers suggested the Bank of England may be less "dovish" than many in the City had believed.
TUC general secretary Frances O'Grady said: "This is the slowest recovery in modern history. George Osborne has already failed to meet the OBR's modest forecast for the economy last year, and today's figures show growth slowing down even more.
"Families are set to be worse off in 2015 than they were five years ago."