Week of data to shift UK election focus back to economy

* First quarter GDP focus of bumper data week

* Data on inflation, jobless, public finances also due
* Releases politically charged ahead of May 6 election

By Christina Fincher

LONDON, April 16 (BestGrowthStock) – The state of the economy is
poised to dominate Britain’s political agenda next week when a
raft of economic data culminating in figures for first-quarter
GDP will show if the country’s recovery is on track.

With the outcome of Britain’s May 6 election in the balance,
unemployment data on Wednesday and government borrowing figures
on Thursday will also be politically charged. Statistics for
inflation and retail sales may be less so.

First quarter GDP figures, due next Friday, are forecast to
show growth of 0.4 percent, the same as in the last three months
of 2009 when Britain finally exited recession.

However, the impact of unusually heavy snow at the start of
the year means uncertainty is high and there is plenty of scope
for surprises.

“GDP figures are the ultimate arbiter of the recovery and
will inevitably provide fuel for further political debate,” said
Philip Shaw, economist at Investec.

Prime Minister Gordon Brown, who was finance minister for 10
years before taking over from Tony Blair in 2007, has made much
of his economic credentials in his campaign to lead Labour to a
fourth term in office.

The opposition Conservatives, whose once comfortable poll
lead has shrunk since the end of last year, will seize on any
GDP disappointment as evidence that Labour’s pro-growth policies
have failed.

But a surprisingly weak reading could prove a double-edged
sword as it would also make it harder for them to sustain their
argument that debt-cutting measures should be brought forward.

“The political impact of the GDP numbers is a tricky one and
I’m not sure which way it would swing,” said George Buckley, UK
economist at Deutsche Bank.

DEFICIT FOCUS

All Britain’s main political parties agree that tough action
is needed to bring down the bloated deficit, running at more
than 11 percent of GDP, so the debate has focused on timing.

The Conservatives say action should start this year while
ruling Labour and the Liberal Democrats — Britain’s third party
enjoying a boost after this week’s leaders TV debate — say the
bulk of spending cuts should be delayed until recovery is
assured.

The parlous state of Britain’s public finances are likely to
make headlines again on Thursday, with data expected to show
record government borrowing in March.

March figures traditionally show the biggest deficit of the
financial year and analysts polled by Reuters expect a deficit
of 24 billion pounds ($38.5 billion), almost 4 billion pounds
higher than the same month last year.

The government will try to accentuate the positive, noting
that the pace of deterioration is slowing and the deficit for
the whole 2009/10 financial year, which ended in March, looks to
be well below the level it forecast as recently as December.

“While the public finances data will undoubtedly be dire
again, they will hopefully show that the rate of deterioration
compared to a year ago is continuing to moderate,” said Howard
Archer at Global Insight.

Unemployment data on Wednesday should likewise point to an
improving trend. Claimant count unemployment fell by 32,300 in
February — its biggest drop since November 1997 — and analysts
expect another 10,000 fall in March.

Brown’s Labour government has made much of the fact that
unemployment — running at 7.8 percent of the workforce — has
risen less than in previous downturns despite the economy having
suffered it deepest recession since World War Two.
Analysts warn, however, that jobs will inevitably be loft
once the next government, of whichever stripe, embarks on tough
fiscal tightening to rein in debt.

Inflation figures on Tuesday are likely to be less explosive
given interest rates are set by the independent Bank of England.

Analysts expect inflation to have picked up to 3.2 percent
in March, more than a full percentage point above the central
bank’s target, from 3.0 percent in February.

The BoE remains confident that inflation will fall back to 2
percent by the end of the year.
Investment Basics

(Editing by Mike Peacock)

Week of data to shift UK election focus back to economy