The UK economy showed signs of revival in April as GDP rose 2.3 per cent, the fastest monthly growth since July last year.
GDP is still 3.7 per cent lower than the pre-pandemic level seen in February last year, however it is now 1.2 percent above the initial recovery peak in October 2020.
Chancellor of the Exchequer Rishi Sunak said: “Today’s figures are a promising sign that our economy is beginning to recover.
“With more than a million people coming off furlough across March and April and the number of employees in work rising, it is clear that our plan for jobs is working.
“But I know there are people who still need our support, which is why the furlough scheme is in place until September to protect as many jobs as possible, and schemes like Kickstart will continue to create jobs for young people, as we look to build the economy of the future.”
Hinesh Patel, portfolio manager at Quilter Investors, said: “Given this GDP reading covers April and doesn’t quite take into account all of the lockdown easing we have seen to date, the government will be pleased with the direction the economy is heading.
"Consumers are clearly making up for lost time and the government will be hoping they continue to spend the lockdown savings many have been fortunate to accumulate.”
He added that real-time data, for instance restaurant and holiday bookings, remained robust and discretionary spending was holding up.
Despite uncertainty about the last step of lockdown easing, the economy was clearly returning to health, he said.
“Much of this optimism though is fairly priced into markets, however, and the Bank of England won’t be able to sit on their hands if the economic recovery strengthens further. With inflation concerns persisting, although slightly overblown in our opinion, Bailey and co may need to act sooner than they may wish."
Patel thought the economy would never return to how it was before, however.
"It has gone through structural changes never seen before on this scale and as such will still need to be nursed along as it returns to sustainable growth.
"But the point will come where the spending taps will need to be switched off the economy stand on its own two feet again. When this is remains to be seen but for now the sun is shining and the roof is being fixed.”
Jesús Cabra Guisasola, associate at Validus Risk Management, agreed the Bank of England was facing a dilemma. He said: “There are no doubts that the UK has been one of the countries coming out in a better position from the pandemic after the success of its vaccination program.
“However, the BoE will need to decide when the best moment is to start tightening its monetary policy as some members like Andy Haldane already voted to scale back the stimulus program during the last meeting.