The Office for National Statistics said GDP rose 0.7% in the three months to the end of June, unchanged from an estimate made a month ago but a marked acceleration on 0.4% in the first quarter. Further details from the ONS on Friday showed that net trade made its biggest contribution to growth for four years.
The news was welcomed by the Treasury, which has pledged to rebalance the economy towards more exports and less reliance on domestic, consumer spending. But economists warn the pickup in exports could prove short-lived given businesses have been complaining that a strong pound is hurting overseas sales.
At the same time, recent turmoil in global markets sparked by China’s stocks rout may dent export demand over coming months. The ONS data also confirmed the manufacturing sector shrank by 0.3% in the second quarter.
The manufacturers’ organisation, EEF, said that raised questions about whether the strong growth in business investment could be sustained, after it notched up the fastest expansion for a year in the second quarter at 2.9%.
“While today’s second estimate of GDP data shows the UK economy has not rebalanced yet – with private consumption remaining the largest driver of growth in Q2 – there were some positive signs of strength in business investment,” said Zach Witton, EEF’s deputy chief economist.
“However, weakness in the manufacturing sector highlights concerns as to whether this will be sustained. Uncertainty as to whether Greece would leave the eurozone, and the pound strengthening against the euro, probably played a part in the weak performance.”
The confirmation that growth rebounded in the second quarter is likely to further fuel speculation about when the Bank of England will raise interest rates from the record low of 0.5%, where they have been since the recession in 2009.
The Bank’s governor, Mark Carney, signalled last month that interest rates could start rising gradually at the turn of the year. But since then there have been volatile swings on commodity and stock markets and signs the global economy is losing momentum.
The latest UK figures follow the release of US GDP data on Thursday that similarly showed healthy growth in the second quarter. The world’s biggest economy beat market expectations, expanding at a 3.7% annual rate, up from the initial estimate of 2.3%.
That news helped buoy stocks on Wall Street and in Europe and they recovered deep losses from earlier in the week when a so-called “Black Monday” on China’s stock markets sparked a global sell-off.
“Despite recent turmoil in the Chinese financial markets the UK and US look set for decent growth through the rest of this year,” said Ian Stewart, chief economist at consultancy Deloitte, commenting on the GDP figures.
But the UK data continued to underscore the gap between the recovery in headline economic growth and living standards.
The ONS said GDP per head, widely seen as a better measure of economic well-being, was now 0.1% below the pre-downturn peak of early 2008, having risen 0.5% in the second quarter. By comparison, without adjusting for population, GDP was 5.2% above its pre-downturn peak, having exceeded it in the autumn 2013.
theguardian.com
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