U.K. Economy Kept 0.4% Growth Pace in First Quarter, Niesr Says

April 9 (Bloomberg) -- The U.K. economy kept up momentum in the first quarter with the same growth pace as the final three months of 2009 when the recession ended, the National Institute of Economic and Social Research said.

Gross domestic product increased 0.4 percent, matching the rate of expansion in the fourth quarter and in the three months through February, the London-based research group, whose clients include the Bank of England and the Treasury, said yesterday in an e-mailed statement.

The Niesr report signals that the worst cold snap since 1979 and an increase in sales tax haven’t derailed the economic recovery. With other data suggesting the economy is maintaining traction before the May 6 election, Prime Minister Gordon Brown and challenger David Cameron are battling over how long to keep up stimulus measures instead of cutting the budget deficit.

“These data reflect a dip in output in January which we associate the cold weather,” Niesr said in the report. “Given this dip in January and the fact that the growth rate was achieved despite the rise in the VAT rate, the underlying rate of growth of the economy is probably greater.”

Niesr publishes its growth estimate after the release each month of industrial production data, which yesterday showed a 1.3 percent increase in manufacturing output for February. The Office for National Statistics will announce GDP data for the first quarter on April 23.

Economic output is 1.1 percent higher than at the end of the recession in September, the institute said. “Output is still 5.4 percent lower than it was in early 2008 and the growth rate is still lower than the trend rate of growth of potential output, so the output gap is still increasing,” Niesr said.

The Bank of England yesterday kept its bond-purchase program unchanged at 200 billion pounds ($304 billion) for a third month as officials try to sustain the economy’s recovery from the deepest recession since World War II.