By Jon Sindreu
LONDON--The British economy was stronger than previously
believed both in the first quarter of this year and throughout
2014, revamped official data showed Tuesday, raising hopes of a
bumper 2015.
The Office for National Statistics said the U.K. economy
expanded a quarterly 0.4%, an upgrade from a previous estimate of
0.3%. At an annualized rate, gross domestic product rose 1.5%,
compared with an earlier reading of 1.2%.
Fresh official estimates also showed British gross domestic
product grew 3% in 2014 as a whole, compared with a previous figure
of 2.8%.
Revisions were mostly due to the construction sector being much
healthier than statisticians had thought. Construction is just a
small portion of the British economy--about 6% of total national
output--but a largely unexplained plunge in activity had
nonetheless made a dent in the nation's growth.
The ONS said production in the construction sector fell much
less during the first quarter than previously believed, as well as
rising strongly throughout 2014, when earlier readings suggested
output had dropped. Despite some changes in how data is calculated,
the revisions were also due to late reporting by some companies,
national statisticians said.
"It is clear that our plan is laying the foundations for
economic security for working people," U.K. Treasury chief George
Osborne said in a statement Tuesday. "The economic plan we've
pursued in Britain these last five years has increased our
resilience."
Nevertheless, the ONS confirmed a weak manufacturing sector
performance during the first quarter as the extraction industry in
the British North Sea was hampered by ultra-low oil prices in the
global markets, but also because the U.K.'s powerhouse service
sector--about 80% of the economy--had a disappointing three months.
This led the economy to slow into 2015.
Trade was also an increasingly large drag on economic growth,
the ONS said, as business surveys show companies struggle to sell
abroad due to the strength of the pound. But figures also confirmed
household expenditure and business investment grew at a healthy
pace.
Indeed, economists are upbeat about Britain's prospects during
the remainder of the year. A survey by market-research firm GfK
Group showed Tuesday that consumer confidence in the U.K. rose in
June to its highest level in more than 15 years. According to GfK,
households were reported extremely willing to undertake major
purchases such as furniture or electrical goods. Since they involve
careful planning, these large purchases are usually a good gauge of
consumer sentiment.
Analysts are hopeful this data show the economy has started
picking up steam following the national election. Although the vote
provided the center-right Conservative Party with a clear victory,
polls released during the campaign led to believe that an unstable
Parliament was a likely outcome, which likely drove consumers and
businesses to delay spending and investment.
This is joined by a recent boost to living standards, both
because of fatter pay checks and subdued growth in consumer prices,
as cheap oil has put a leash on inflation around the world. When
compared to inflation, rises in regular pay for British workers in
April were the fastest in almost eight years, after a sustained
period of declining living standards.
However, some other signs ring less positive for households in
the U.K. According to the ONS, each Briton had broadly the same
amount of money left to spend after taxes and inflation during the
first quarter than they had in the last quarter of last year.
Also, compensation of employees, which includes both pay and
pension contributions, fell 0.5% during the first quarter, official
figures showed, while profits of companies rose a powerful 3.5%.
Since mid-2014, wages had increased at a faster pace than corporate
surpluses.
Official figures also suggested that consumers may be running
down their savings in order to keep spending. The household savings
ratio, which estimates how much of their disposable income families
save, fell to 4.9% during the first quarter, the lowest since the
third quarter of 2008.
Other woes could derail prospects for stronger growth throughout
2015. Economists remain puzzled at the U.K.'s lackluster
productivity growth, which is a key gauge of its long-term health.
The possibility of Britain leaving the European Union is another
source of instability that could start unsettling markets in the
near future, after Prime Minister David Cameron promised to hold
and in-out referendum on EU membership.
Write to Jon Sindreu at jon.sindreu@wsj.com