UK Economy Grows, but Struggle Lies Ahead, Say Analysts

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Gross domestic product (GDP) data from the U.K. on Thursday showed the economy grew 0.3 percent in the first quarter of 2013 but analysts warned that the economy will struggle in the months ahead.

Economists polled by Reuters had estimated growth of just 0.1 percent.

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The news meant the U.K. avoided a triple-dip recession and it helped lift the pound to a two-month high against the dollar.

A number of high profile economists and the International Monetary Fund have urged U.K. finance minister George Osborne to consider scaling back his austerity program but so far he has stuck to the plan.

Howard Archer, chief U.K. and European economist at IHS Global Insight said he expected the economy to struggle to improve in 2013.

"While GDP growth of 0.3 percent quarter-on-quarter is a cause for minor celebration, it does not fundamentally alter the picture of an economy that is struggling to develop even moderate, sustainable expansion," Archer said in a note on Thursday.

"Indeed, the economy's struggle for growth is currently not being made any easier by the increased squeeze on consumers' purchasing power coming from higher inflation and very low earnings growth while global economic activity is showing signs of faltering," Archer said.

IHS forecasts that there will be "limited" growth of 0.8 percent in 2013.

Geoffrey Dicks, chief U.K. economist at Novus Capital Markets, said Thursday's data would give the U.K. a little bit of confidence but it could forestall further quantitative easing by the central bank.

"There's a big question mark over what the Bank of England does next month, some economists think there will be another round of QE but on these numbers I don't think so... it's up to the economy now," Dicks said.

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