UK economy picks up pace in second quarter
Construction and manufacturing lift economic growth and boost confidence
Consumer spending rose 0.4 per cent in the second quarter of the year. Photographer: Chris Ratcliffe/Bloomberg
UK economic growth accelerated more than initially estimated in the second quarter, helped by construction and manufacturing and a boost from trade, offcial data showed today.
Gross domestic product increased 0.7 per cent from the first quarter, when it rose 0.3 per cent, the Office for National Statistics said. That compared with an initial estimate of 0.6 per cent.
Exports rose the most in more than a year and net trade contributed 0.3 per centage point to GDP.
Signs that growth is gaining traction have prompted some economists to raise forecasts this year and next. While risks to the economy remain, Bank of England governor Mark Carney has sought to cement the recovery by introducing forward guidance to quell investor bets on higher interest rates.
“The recent pick-up in activity should boost confidence and so could kick off a virtuous circle of improving sentiment and further rises in output,” said Vicky Redwood, an economist at Capital Economics Ltd. in London. “The recovery still faces some significant obstacles, not least flat bank lending and the ongoing fiscal squeeze.”
Manufacturing grew 0.7 per cent in the second quarter, higher than the 0.4 per cent initially estimated, the statistics office said. Construction growth was revised to 1.4 per cent from 0.9 per cent. Services, the largest part of the economy, was unrevised at 0.6 per cent growth.
Today’s release is based on about 82 per cent of the data that will ultimately be available for the quarter.
Exports rose 3.6 per cent in the three months through June, the most since the fourth quarter of 2011, and imports increased 2.5 per cent. Net trade has now added to GDP for two consecutive quarters, the first time that’s happened since the first quarter of 2011.
Consumer spending rose 0.4 per cent, government expenditure increased 0.9 per cent and gross fixed capital formation jumped 1.7 per cent.
The BOE has said it plans to keep its key interest rate at a record low of 0.5 per cent as long as unemployment exceeds 7 per cent. The rate was 7.8 per cent in the second quarter, and the bank doesn’t see it reaching 7 per cent until at least the fourth quarter of 2016. That pledge is subject to caveats, including a “knockout” if inflation is forecast to be more than half a per centage point above the BOE’s 2 per cent target 18 to 24 months ahead. (Bloomberg)