UK GDP growth bounces back

he UK GDP growth rate doubled in the second quarter, providing firm support for the Bank of England’s (BoE) rate- rise earlier this month, reports Xinhua from London.

Quarter-on-quarter growth was 0.4 per cent for the second quarter, double the 0.2 per cent growth in the first quarter of the year.

First quarter figures had slumped to 0.2 per cent after a run of quarters at 0.4 per cent growth, affected by bad weather.

New figures from the official statistics body the Office of National Statistics (ONS) showed that there has been some unwinding of the impact of bad weather in affected industries. The pick-up in Q2 was also boosted by consumers taking advantage of the warm weather and the football World Cup celebrations.

Despite a sharp pick-up in retail sales volumes in Q2, quarterly consumer spending growth rose by just 0.3 percent, suggesting that spending off the high street remained subdued.

The services industries and construction increased by 0.5 per cent and 0.9 per cent respectively, while production decreased by 0.8 percent.

Business investment increased by 0.5 per cent over the quarter.

Economists had speculated at the time of the first quarter figures that the stumble in growth was a warning of a general downturn in the economy, and the lower figures would be maintained in later quarters.

The conclusion reached by most economists was that the downturn was a downward blip in data, a view shared by the central bank the BoE.

At the beginning of this month the BoE raised the bank rate for only the second time in 11 years, taking it to 0.75 percent, and part of its reasoning was that the poor first quarter figures were an exception largely caused by poor weather.

Friday’s figures have backed the bank’s assumption.

 “The BoE will be reassured by the GDP growth figure. Growth of 0.4 per cent is what they were expecting, they would have worried had it turned out to be weaker than that,” Dr. Garry Young, director of macroeconomic forecasting at the National Institute of Economic and Social Research (NIESR), said on Friday afternoon.

The NIESR, an independent London-based economic think-tank, released its own GDP forecast figures on Friday afternoon, which detailed growth rising slightly from the official Q2 figure of 0.4 per cent to 0.5 percent.

Growth is close to the potential, according to the NIESR, and there is some evidence that services sector output has stabilized while the relatively small construction sector continues to gather momentum.

The NIESR survey noted that the manufacturing and construction sectors are recovering after a particularly weak

start to the year. The dominant services sector, accounting for 80 per cent of the economy, is set to maintain a similar rate of growth from the second into the third quarter.

“Growth in the second quarter will continue in the third quarter. Weakness in March and April was to do with the weather but figures since then have been fairly promising and I think we can be confident that soft patch is past,” said Young.

“Q1 weakness and in the monthly data in April is now past and May and June figures are much more reassuring. I would expect something close to 0.5 per cent for the third quarter.”

 

UK GDP growth bounces back

he UK GDP growth rate doubled in the second quarter, providing firm support for the Bank of Englands (BoE) rate- rise earlier this month, reports Xinhua from London. Quarter-on-quarter growth was 0.4 per cent for the second quarter, double the 0.2 per cent growth in the first quarter of the year. First quarter figures had slumped to 0.2 per cent after a run of quarters at 0.4 per cent growth, affected by bad weather. New figures from the official statistics body the Office of National Statistics (ONS) showed that there has been some unwinding of the impact of bad weather in affected industries. The pick-up in Q2 was also boosted by consumers taking advantage of the warm weather and the football World Cup celebrations. Despite a sharp pick-up in retail sales volumes in Q2, quarterly consumer spending growth rose by just 0.3 percent, suggesting that spending off the high street remained subdued. The services industries and construction increased by 0.5 per cent and 0.9 per cent respectively, while production decreased by 0.8 percent. Business investment increased by 0.5 per cent over the quarter. Economists had speculated at the time of the first quarter figures that the stumble in growth was a warning of a general downturn in the economy, and the lower figures would be maintained in later quarters. The conclusion reached by most economists was that the downturn was a downward blip in data, a view shared by the central bank the BoE. At the beginning of this month the BoE raised the bank rate for only the second time in 11 years, taking it to 0.75 percent, and part of its reasoning was that the poor first quarter figures were an exception largely caused by poor weather. Fridays figures have backed the banks assumption. The BoE will be reassured by the GDP growth figure. Growth of 0.4 per cent is what they were expecting, they would have worried had it turned out to be weaker than that, Dr. Garry Young, director of macroeconomic forecasting at the National Institute of Economic and Social Research (NIESR), said on Friday afternoon. The NIESR, an independent London-based economic think-tank, released its own GDP forecast figures on Friday afternoon, which detailed growth rising slightly from the official Q2 figure of 0.4 per cent to 0.5 percent. Growth is close to the potential, according to the NIESR, and there is some evidence that services sector output has stabilized while the relatively small construction sector continues to gather momentum. The NIESR survey noted that the manufacturing and construction sectors are recovering after a particularly weak start to the year. The dominant services sector, accounting for 80 per cent of the economy, is set to maintain a similar rate of growth from the second into the third quarter. Growth in the second quarter will continue in the third quarter. Weakness in March and April was to do with the weather but figures since then have been fairly promising and I think we can be confident that soft patch is past, said Young. Q1 weakness and in the monthly data in April is now past and May and June figures are much more reassuring. I would expect something close to 0.5 per cent for the third quarter.