A pleasant surprise on growth
Of course, today's first estimate for UK growth in the second quarter of 2010 is a pleasant surprise. After several quarters where the City has been disappointed by the first official take on the pace of the recovery, a figure so far above expectations makes a welcome change. But it's always important not to read too much into one set of figures - however striking. That could be especially important today.
The figures show surprising strength in the service sector as well - up by 0.9%, three times the pace of growth at the start of the year - with much of that growth driven by government spending and business and financial services. But the big outlier in these numbers is construction.
This one sector which accounts for a tiny share of the overall economy was responsible for more than 0.4 percentage points of the 1.1% estimate for overall growth. Construction is thought to have grown by an astonishing 6.6% in the three months after March - after two successive quarters in which it shrank by 1.6%.
This is not to suggest that the GDP figure is wrong (though it will almost certainly be revised one way or another). Output in the construction sector is notoriously volatile. What it does tell you is that, even if this first figure of 1.1% growth does turn out to be right, it doesn't necessarily suggest that the recovery across the entire economy will be much stronger than previously thought.
Strip out construction, and the pace of growth is very encouraging, but broadly consistent with what the surveys have been suggesting - that is to say,roughly in line with the long-term average for the economy, and broadly similar to the early stages of past recoveries.
If this were indeed a normal recovery, you would eventually expect the economy to start to grow well above its long-term trend rate, to make use of all the ready spare capacity created by an unusually deep recession. In that kind of an environment, this 1.1% estimate would not seem so strange.
But in the past year we have seen several European countries grow rapidly at the start of their recoveries, only to slip back into flat or even negative growth.
I'm not suggesting that will happen in the UK. But recent surveys suggest that confidence in many sectors is already beginning to ebb. With so much uncertainty hanging over the UK and global economy, no-one should assume that today's figure is a sign of things to come.
UPDATE 1208: A look back at history puts an interesting perspective on today's initial growth number. The last time we grew this fast was in the first quarter of 2006, and in the past decade there's only one quarter - the first three months of 2001 - in which the UK economy has grown by more than 1.1%.
But, if you go back further - to the mid-80s and mid-90s - quarterly growth of more than 1% was quite common. Then, as now, the economy had some extra room to grow as a result of the previous recession. But this was usually in what you might call the "mature" stage of the recovery, a year or two after the economy had started to look up. When growth has been this strong early in the upturn, it has usually slipped back - often quite dramatically.
To me the most interesting comparison is with the second and third quarter of 1981. Back then, the economy was recovering from five successive quarters of decline. The first recorded growth, in the second quarter of that year, was fairly weak - growth of only 0.2%. But in the third quarter, the economy grew by 1.4%.
This was seen as vindication for then Chancellor Geoffrey Howe, who had appalled all those economists by announcing massive tax rises and spending cuts in the spring Budget. In the end, Britain's recovery was fairly strong. But not before some pretty big bumps on the way.
Ominously, perhaps, the next GDP figure after that 1.4% rise in the third quarter was 0.0. The economy didn't grow at all in the last three months of 1981; six months later it grew by 1.3%, then it stagnated for another six months before growing rapidly for much of 1983. In line with what I said earlier, the quarterly growth rate was more than 1% in three out of four quarters in that year.
I'm not suggesting that past history can tell us what will happen this time - after a very different kind of recession, and a very different kind of fiscal and monetary response. It's also worth noting that policy makers at the time were given a different picture by the ONS. Most of the GDP estimates for the period coming out of the recession in the early 80s have been revised up, though this took place years after the event.
No, the lesson from all these past numbers is more basic: that quarterly GDP numbers tend to jump around, especially coming out of a long recession. There are going to be some big swings in the quarterly numbers before the true pace of the recovery becomes clear.