Tags: economy | great britain

UK Economy Growing Twice Expected Rate

Monday, 26 Jul 2010 08:29 AM

Britain's economy grew almost twice as fast as expected in the second quarter of this year propelled by a sharp pick-up in services and the biggest rise in construction in almost 50 years.

Data from the Office for National Statistics showed gross domestic product jumped 1.1 percent on the quarter, the fastest rise in four years. On the year, it was up 1.6 percent, the first positive reading in two years.

The figures, which were well above even the highest forecasts in a Reuters poll, suggests the economic recovery is more robust than many thought and lifted sterling more than half a cent against the dollar.

Gilt futures tumbled as investors questioned how long the Bank of England would keep interest rates at their record low 0.5 percent, particularly with inflation running so far above target.

"The prospect of an interest rate hike before the end of the year has just jumped while further (monetary) stimulus is now looking less likely," said Howard Archer, chief UK and European economist with IHS Global Insight.

"The much sharper-than-expected pick up in GDP growth in the second quarter is likely to make discussions within the Bank of England's Monetary Policy Committee even more lively."

Finance minister George Osborne said the figures were evidence that the private sector would be able to fill the gap left by public spending cutbacks.

"Today's figures show the private sector contributing all but 0.1 percent of the growth in the second quarter, and put beyond doubt that it was right to begin acting on the deficit now," he said.

Still, the figures showed the economy has recouped only a quarter of the output lost during the 18-month recession. And analysts cautioned that there could be a loss of momentum in the second half of this year.

"My hunch is that Q3 is certainly not going to be as good as this," said Amit Kara, economist at UBS, who said the government's forecast for 1.3 percent growth this year still looked optimistic.

"This is about as good as it gets."

The jump in output was mainly down to the services sector, which enjoyed its fastest growth in three years, expanding by 0.9 percent on the quarter -- three times as fast as in Q1 and contributing 0.7 percentage points to growth.

Manufacturing grew 1.6 percent, its biggest rise in more than 10 years.

Construction leapt by 6.6 percent on the quarter -- its fastest rate since 1963. The construction data was based for the first time on a new monthly survey, rather than estimates which have previously been used at this stage.

The rebound in construction output in Q2 came after a fall of 1.6 percent in Q1 which the ONS said was due to the poor weather. Construction output contributed 0.4 percentage points to growth between April and June.

© 2017 Thomson/Reuters. All rights reserved.

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Britain's economy grew almost twice as fast as expected in the second quarter ofthis year propelled by a sharp pick-up in services and the biggest rise inconstruction in almost 50 years.Data from the Office for National Statistics showed gross domestic productjumped 1.1...
economy,great britain
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2010-29-26
 

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