UK avoids triple-dip recession

The figures showed the impact of the snow at the start of the year was not as bad as feared, with weather-hit trading on the high street offset by a boost in energy demand as households ramped up their heating during the cold snap.

Deputy Prime Minister Nick Clegg told LBC 97.3 radio: "That's a better number than I think many people had been anticipating, but it's one number for one quarter.

"We haven't triple-dipped, so that's obviously a welcome thing, but I don't want anyone to think that somehow we are out of the woods yet.

"We have still got a lot of work to do. The healing of the British economy is taking longer than we had anticipated and we will continue to work hard to make sure the country and the economy grow from strength to strength."

Chancellor George Osborne said: "Today's figures are an encouraging sign the economy is healing. Despite a tough economic backdrop, we are making progress."

He added: "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."

The ONS said the powerhouse services sector grew by 0.6% between January and March, driven by 1.1% growth in the wholesale and retail distribution, hotels and restaurant trades sector.

There was also a strong boost from the transport, storage and communications sector, which saw growth of 1.4%.

Surging demand for electricity and gas during the cold weather saw output from the energy supply sector rise 0.5%.

While sales in the retail sector fell in January and March, a strong February helped it notch up growth of 0.3% overall in the quarter.

The figures will relieve some of the pressure on Mr Osborne to rethink his austerity policy, following recent warnings that the UK is a "crisis economy" and last week's ratings downgrade.

But fears remain over the strength of the recovery, with key sectors such as construction and manufacturing still well below the peak in 2008.

Construction activity plunged by 2.5% in the first quarter and still remains 18.1% below pre-financial crisis levels.

Production and manufacturing edged 0.2% higher at the start of the year, but are also significantly down on 2008 - by 13.4%.

The economy as a whole is 2.6% below the 2008 peak, despite improvements from the services sector, which is 0.8% higher than five years ago.

The figures are better than most economists had been expecting, with growth of just 0.1% pencilled in.

But it is only the first estimate and is subject to change in future revisions, with updated figures due on May 23.

The pound rose sharply after the gross domestic product (GDP) data, gaining 1% against the US dollar.

While economists said the figures were comfortably above forecasts, they warned the first quarter bounce back was relatively "feeble", given the 0.3% contraction at the end of last year.

Vicky Redwood, of consultancy Capital Economics, said: "The recovery still faces significant obstacles ahead, with households still experiencing falling real pay and policymakers still struggling to get bank lending to rise.

"Nonetheless, today's figure offers some hope that things might finally be starting to move in the right direction again."

Rob Carnell at ING Bank cautioned that the first estimate is based on "scant real data", taking into account only 44% of total GDP output.

But he said it was "one in the eye" for the International Monetary Fund (IMF), which criticised the Government's deficit-busting approach, and ratings agencies that have stripped the UK of its AAA status.

Business Secretary Vince Cable said: "We've always said the road to recovery would be a marathon, not a sprint.

"Today's figures are modestly encouraging and taken alongside other indicators such as employment figures, suggest that things are going in the right direction.

"However there is still a long way to go and some serious issues such as the systemic lack of bank lending to SMEs (small and medium-sized enterprises), the weakness in the construction sector and the need to press further on trade and exports, which I am doing now on my visit to Brazil.

"These issues all need to be addressed before people feel like the economy is genuinely starting to recover."

However shadow chancellor Ed Balls said more action was needed to kickstart the economy. He said: "These lack-lustre figures show our economy is only just back to where it was six months ago and continue the picture of flat-lining we have seen since the last spending review. David Cameron and George Osborne have now given us the slowest recovery for over 100 years.

"This stagnation in our economy is the reason why people are worse off than when this Government came to office. They took an economy that was starting to grow strongly, with falling unemployment and a falling deficit, and delivered stagnation, rising unemployment and £245 billion more borrowing than planned.

"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 kick-start our economy and strengthen it for the long-term - as Labour and the International Monetary Fund have warned.

"We need radical bank reform and a jobs and growth plan, including building thousands of affordable homes and a compulsory jobs guarantee for the long-term unemployed. And instead of a tax cut for millionaires, we need a lower 10p starting rate of tax to ease the squeeze on millions of people on middle and low incomes.

Labour MP John Mann, a member of the House of Commons Treasury Committee, said that today's figures confirmed "the Japan-isation of the British economy".

Mr Mann told BBC News: "In Japan, their economy stagnated - sometimes it went down to below zero, sometimes just above it, but it kept on this very low-growth trend and kept there for 15 years and it's been a disaster for Japan.

"We are in the same cycle and breaking out of it will need a change of policy.

"It's the trend that's the problem, that we have this continuous virtually-no-growth trend and we are falling further and further behind our competitors."