But Labour and economists insist the figures don't add up to a recovery
George Osborne has hailed news that the UK escaped a triple-dip recession in the first quarter of 2013 as evidence that the coalition's policies are helping to "build an economy fit for the future".
After a challenging week, in which the International Monetary Fund urged him to ease up on his austerity policies, and Fitch became the second agency to strip the UK of its AAA credit rating, the chancellor welcomed the 0.3% growth in GDP announced by the Office for National Statistics (ONS) on Thursday.
"Today's figures are an encouraging sign the economy is healing," he said. "Despite a tough economic backdrop, we are making progress. We all know there are no easy answers to problems built up over many years, and I can't promise the road ahead will always be smooth but, by continuing to confront our problems head on, Britain is recovering and we are building an economy fit for the future."
A second quarter of contraction, after the 0.3% decline in the final three months of 2012, would have met economists' standard definition of a recession, fuelling Labour's argument that the coalition's cutbacks have choked off recovery.
But despite the unexpectedly strong growth figure, shadow chancellor Ed Balls pointed out that GDP remained at the same level as it had been six months earlier. The ONS said the economy had been "broadly flat" over the past 18 months.
"If we're to have a strong and sustained recovery and catch up all the ground we have lost over the last few years, we need urgent action to kickstart our economy and strengthen it for the long term – as Labour and the IMF have warned," Balls said.
According to the detail of the ONS's figures, the upturn in GDP was driven by growth of 0.6% in the key services sector, which includes retail and transport and makes up more than three quarters of the economy.
Industrial production also expanded, by 0.2% – though much of that was accounted for by rising North Sea oil and gas production. Activity in the hard-hit construction sector declined by 2.5%.
The business secretary, Vince Cable, said: "Today's figures are modestly encouraging and, taken alongside other indicators such as employment figures, suggest that things are going in the right direction."
Sterling hit its highest level against the dollar in two months after the news, rising by a cent and a half to $1.5450, amid speculation that the Bank of England will be less likely to expand its emergency quantitative easing programme against the background of a healthier economy.
"From a policy point of view, the signs that the UK economy may be growing, albeit weakly, are probably enough to put to rest any chance that the Bank of England would expand QE in May," said David Tinsley at BNP Paribas. Three of the nine members of the Bank's monetary policy committee voted for an expansion of QE at its April meeting.
A return to modest growth may also help to strengthen Osborne's hand in the tough negotiations with ministers over individual departmental spending plans, to be announced in June's spending review.
"Today's figure should provide some cover for the chancellor to continue on the path of fiscal austerity; we do not expect any major changes in the deficit reduction plan, at least this side of the general election," said George Buckley of Deutsche Bank.
However, Tony Dolphin, chief economist at the Institute for Public Policy Research, said the big picture revealed by yesterday's figures was one of an economy that was "stuck in a rut". The ONS said GDP was 2.6% below its pre-crisis peak in 2008, making the recovery weaker than that from any recession since the 1930s.
"Normally, we would expect the economy to grow by around 12% over any five-year period," said Dolphin. "The fact that it has contracted by 2.6% instead means almost 15% of potential output has been lost, along with the employment opportunities and tax revenues that would have accompanied it."
David Brown of New View Economics said: "The government have been very, very lucky. They have avoided a third dip into recession by the skin of their teeth. There is nothing to celebrate over as the UK economy is not out of the woods yet."
IMF officials are due to arrive in London next month to scrutinise the government's tax-and-spending policies, as part of its annual health check of the economy, after chief economist Olivier Blanchard accused Osborne of "playing with fire".
Dhaval Joshi of BCA Research said the government's continued commitment to austerity was in contrast to the shift in approach from the eurozone countries, with Greece, Spain and Portugal being given extra time to reach their deficit-reduction targets. He argued that planned cuts would depress growth more dramatically in the UK between 2012 and 2015 than in crisis-hit Italy or Spain. "Just like the UK, the monetary union's third- and fourth-largest economies have been in extended, austerity-caused economic stagnations. But for Italy and Spain, peak austerity is now over," he said. "The UK government shows no sign of budging from its plan A, while euro area policymakers are signalling a shift away from aggressive fiscal consolidation."
Despite the snow and unusually cold weather in the first three months of the year, the ONS denied that the weather had had much impact on the figures. While retailers suffered in January and March, that was partly offset by increased demand for energy from householders turning up their heating.
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