No rush to increase interest rates in the UK after GDP numbers

Figures from the Office for National Statistics (ONS) published this morning showed that the U.K. economy grew by only 0.5% in the first quarter of 2011, compared with a  0.5% decrease in Gross Domestic Product (GDP) in the fourth quarter of 2010. Expectations are for nearly 2% growth in U.S. GDP for the same period underscoring the relative weakness of the U.K. which has 80% of its job in the services sector. 

Today's results from Barclays (BARC) shows that the financial services sector will be struggling to boost top line revenues for some time, particularly the government controlled banks which are shrinking their balance sheets. Barclays shares are down nearly 5% today after net operating income dropped 1% to £6,478m from £6,557m a year earlier. Adjusted profit before tax rose 10% in the first quarter of 2011, despite a 15% drop in income at Barclays Capital. Adjusted profit before tax grew to £2,004m from £1,822m in the first quarter of 2010.

With just 0.5% growth, the Bank of England is unlikely to raise interest rates any time soon despite inflation worries which are likely to dissipate in 2012 as rises in commodity prices come to a halt. Good news for those with big loans, not so good for savers!