British economy bounces back in second quarter
AFP
Britains economy accelerated in the second quarter of 2015, helped by rebounding services activity and industrial output, official data showed yesterday, reports AFP from London.
Gross domestic product grew 0.7 per cent between April and June, the Office for National Statistics (ONS) said in an initial estimate. That matched analysts forecasts.
The dominant services sector helped the economy improve on a disappointing first quarter when GDP increased by just 0.4 per cent, following 0.8-per cent expansion in the fourth quarter of last year.
After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years, said ONS chief economist Joe Grice.
But the pattern has differed across the economy. Overall growth has been driven by the service sector and the strongest growth in mining and quarrying since 1989.
However, manufacturing output has fallen slightly and construction has been flat.
Britains services sector, representing more than three-quarters of economic output, also grew by 0.7 per cent in the second quarter.
Rising North Sea oil and gas production helped industrial output gain 1.0 per cent, while construction was unchanged and manufacturing slid 0.3 per cent.
Grice added that rebounding growth takes GDP per head back to broadly level with its pre-economic downturn peak in early 2008.
Strengthening growth could meanwhile fuel fresh speculation over the timing of an interest rate hike, analysts said. GDP is now 5.2 per cent ahead of its level in the first quarter of 2008, prior to the recession which saw the economy shrink by as much as 6.0 per cent.
The acceleration in growth raises questions over how long the Bank of England will be able to maintain interest rates at 0.50 per cent, especially with wages now rising strongly, said economist Ben Brettell at brokerage Hargreaves Lansdown.
BoE governor Mark Carney has forecast that Britains record-low interest rates could start to rise at the turn of the year.
Carney expects the key rate to climb over the next three years from its current level of 0.50 per centwhere it has stood for more than six years in order to stimulate growth.
It would not seem unreasonable to me to expect that, once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historic averages, Carney said earlier this month.
In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.
