19:43 ET<\/span><\/span><\/p>\nKey UK economic growth figures are published later that will show whether the economy has rebounded from the contraction at the end of last year or fallen into a double-dip recession.<\/p>\n
The economy shrank by 0.5% in the final three months of last year due to heavy snow, taking most analysts by surprise.<\/p>\n
The market expects GDP to have risen between January and March by slightly more than last quarter’s contraction.<\/p>\n
The figure will help determine interest rates set by the Bank of England.<\/p>\n
Without the impact of the snow at the end of last year, the Office for National Statistics said growth would have been flat in the fourth quarter of 2011.<\/p>\n
Interest rates<\/span><\/p>\nThe Bank will be watching the latest figures with interest. It has so far resisted calls to raise interest rates, despite the inflation rate being double its 2% target, largely on the basis that doing so would jeopardise the fragile economic recovery.<\/p>\n
However, three of the Bank’s nine-member Monetary Policy Committee (MPC) have voted to raise rates for the past three months.<\/p>\n
One of them, Andrew Sentance, warned on Tuesday that the Bank’s credibility was at stake if did not raise rates.<\/p>\n
However, the fact that inflation, as measured by the Consumer Prices Index, fell to 4% this month from 4.4% in March, has relieved some of the pressure on the Bank.<\/p>\n
Whereas many economists had expected the Bank to raise rates as early as May, the market now expects a move later in the summer.<\/p>\n
A BBC poll of 22 economists published this week found that 14 expected rates to go up in August.<\/p>\n
But much will depend on the first quarter GDP figures.<\/p>\n
Strong growth will increase pressure on the MPC to raise rates, on the basis that the recovery is less fragile and inflation must be brought down.<\/p>\n
Weak growth, or even further contraction, would make any early rise unthinkable, as it would put further pressure on already stretched households and businesses and so undermine future growth.<\/p>\n
Spending cuts<\/span><\/p>\nThe government will also be watching the figures carefully. Weak growth would heighten criticism of its spending cuts, which are starting in earnest this month.<\/p>\n
Some economists have criticised the speed and size of the cuts, which they say are putting the recovery at risk.<\/p>\n
The government has argued the cuts are necessary to restore international investors’ confidence in the UK, and will lower the country’s borrowing costs, which means less money has to be wasted on debt repayments.<\/p>\n
The coalition will see strong GDP growth, or at least stronger than expected, as vindication of its spending cuts.<\/p>\n<\/div>\n
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