Outlook: Narrow miss

THE BRITISH economy expanded by less in the first quarter of this year than any other quarter since the tail-end of the last recession. Yet yesterday's figures were greeted with remarkable cheer. The reason is one of relief; the vast majority of economists think the slowdown in January to March is as bad as it is going to get. We have, they think, achieved the proverbial soft landing.

Better still, the figures indicated that the pace of decline in manufacturing has eased. Unlike other areas of the economy, manufacturers have indeed suffered a recession - technically defined as two successive quarters of falling output - but they now appear to be pulling out of it despite the strong pound. Services output grew even more slowly in the first quarter than in the final months of 1998. But economists draw comfort from all sorts of anecdotal evidence that services are now picking up again.

This evidence ranges from the informal, the reappearance in London's restaurant and shop windows of help-wanted notices, to the more formal - pick-ups in confidence in the biggest business surveys. The housing market has certainly perked up, as net lending and house price figures show.

The biggest remaining worry is how much the strong exchange rate could yet damage exports. It is still just about possible that this could still tip the whole economy into recession. Furthermore, revisions of preliminary data are frequent and large and it might be unwise to put too much faith in yesterday's figures.

But even assuming the worst, it is hard to see the UK economy suffering more than two or three quarters of marginally negative growth. Compared to the scale of boom and bust Britain experienced in the 1980s and early 1990s, this is quite an achievement on the part of policy-makers. It even feels a little bit too good to be true - as if to declare a soft landing is tempting fate. The formal declaration will have to wait until we can be absolutely sure.