The British economy grew by 0.5 per cent in the first three months of 2011, official data showed yesterday, rebounding in line with market expectations after a sharp decline late last year.

“Gross domestic product (GDP) increased by 0.5 per cent in the first quarter of 2011, following a decrease of 0.5 per cent in the fourth quarter of 2010,” the Office for National Statistics (ONS) said in a statement.

“The effect of the abnormal weather conditions in December 2010 is estimated to have subtracted 0.5 per cent from growth in the fourth quarter.

“GDP is estimated now to have returned to the level in the third quarter of 2010,” it added.

Economists said activity was broadly flat – and argued that the modest recovery was not strong enough to persuade the Bank of England to lift interest rates to combat high inflation, amid stubborn concern over deep state spending cuts and high fuel prices.

“The 0.5 per cent gain was in line with consensus but the increase offset the 0.5 per cent decline in the fourth quarter –so GDP was flat in the last 6 months,” VTB Capital economist Neil MacKinnon told AFP.

Between January and March, economic output was 1.8 per cent higher compared with the first quarter of 2010, according to the ONS.

“My view is that economic recovery this year is unlikely to be strong enough to warrant a tightening in monetary policy – the fiscal squeeze and the impact of higher energy prices will act as strong headwinds,” added Mr MacKinnon.

And IHS Global Insight economist Howard Archer described the first-quarter data release as “disappointing”.

He said: “This is a pretty disappointing performance, which points to the economy being only stagnant overall during the past two quarters.”

He said: “This fuels concern over the underlying strength of the economy and its ability to withstand the fiscal squeeze.”