UK gross domestic product (GDP) in volume terms rose by 0.3 per cent in the first quarter of 2010 compared with the previous quarter, revised from a growth increase of 0.2 per cent published in April.

The volume of output in the production industries rose by 1.2 per cent, within which, manufacturing rose by 1.2 per cent. Output of the service industries increased by 0.2 per cent; construction output is estimated to have fallen by 0.5 per cent . In real terms, household expenditure was unchanged compared with the previous quarter, while gross fixed capital formation rose by 1.5 per cent. GDP at current market prices rose by 2.1 per cent.

Hetal Mehta, Senior Economic Advisor to the Ernst & Young ITEM Club, comments: "1) The upward revision was expected in light of the strong manufacturing data for March 2) The GDP figures are continuing to move closer to what the surveys have been saying for some time 3) But downside risks to economic growth remain, not least the extent of the fiscal tightening we will see implemented.

"The official data and survey results are now more in synch, and some upward revision was expected in light of the strong manufacturing data for March. The fact that consumer spending was flat suggests that the VAT rise dampened demand. But since this figure could easily have been negative, especially given the weather disruption, it is not too bad an outcome. The main driver of growth was stocks, which contributed 0.4%, and to a lesser extent, government spending and investment.

"However, despite the persistent weakness of sterling, net exports were once again a drag on the economy, which is disappointing in terms of the much needed rebalancing away from its dependence on consumers and government support. And weakness in the Eurozone, which is the UK's most important export market, may also reduce the chances of an export-led recovery.

"Looking ahead to Q2, we expect an acceleration in GDP based on the strength of recent survey data and the momentum that has built through to March. However, further ahead, downside risks to economic growth remain, not least the extent of the fiscal tightening we will see implemented in the emergency Budget next month."