Jennifer Ryan and Scott Hamilton London
UK economic growth accelerated in the second quarter as all main industries showed expansion for the first time in three years, indicating Britain’s recovery is gaining traction.
Gross domestic product (GDP) increased 0.6 percent from the first quarter, when it rose 0.3 percent, the Office for National Statistics (ONS) said yesterday. That matched the median forecast of 37 economists surveyed.
The services, production, construction and agriculture sectors all grew output, the first time that has happened since the third quarter of 2010. Year on year, GDP increased by 1.4 percent.
New Bank of England governor Mark Carney is preparing to outline the monetary policy committee’s (MPC’s) approach to forward guidance on policy next month as he looks to cement the economic rebound.
Threats to growth remain, both domestically from the government’s fiscal squeeze and internationally from the tensions in the euro zone and a slowdown in China.
“Evidence is building that the economy is gradually getting back on its feet,” Vicky Redwood, an economist at Capital Economics in London, said. “The firmer signs make it all the more important that the MPC reassures the markets that interest rates will stay low even as the recovery gathers further momentum.”
Services, which account for 78 percent of the economy, grew 0.6 percent in the second quarter, adding half a percentage point to GDP, the ONS said.
Construction expanded 0.9 percent, agriculture grew 1.1 percent and production increased 0.6 percent. Within production, manufacturing expanded 0.4 percent.
In a separate report, the statistics office said services grew 0.2 percent in May from April and increased 1.5 percent compared with a year earlier. While the recession has left UK GDP 3.3 percent below its peak in early 2008, services output is only 0.2 percent lower.
The expansions in the first and second quarter are the first back-to-back periods of growth since 2011. Yesterday’s report is a first estimate and is based on about 44 percent of the data that will ultimately be used.
Britain is the first of the Group of Seven nations to report GDP for the second quarter. The US economy probably expanded at a 1.6 percent annualised rate in the period, compared with 1.8 percent in the first quarter, according to the median forecast in a survey on July 11.
The Commerce Department will publish its advance estimate on July 31.
The pick-up in the economy may bolster the standing of UK Prime Minister David Cameron less than two years before the next general election. GDP is 2.1 percent above where it was in the second quarter of 2010, when his coalition came to power. – Bloomberg