UK GDP growth revised up to 0.7%

Written By Unknown on Jumat, 23 Agustus 2013 | 16.50

23 August 2013 Last updated at 05:37 ET

Economic growth in the UK during the second quarter of the year has been revised up to 0.7% by the Office for National Statistics (ONS).

The initial estimate, released in July, suggested growth domestic product (GDP) - the UK's economic output - had risen by 0.6% from the previous quarter.

The ONS said the revision reflected small upward adjustments to the estimated output of several industries.

Compared with a year ago, GDP in the three months to June was 1.5% higher.

The latest revision adds to evidence that the UK economic recovery may finally be gaining momentum after almost four years of stagnation since the 2008-09 recession ended.

The 0.7% rate matches the pace recorded during the third quarter of 2012, when the economy was buoyed by the London Olympics, which was itself the fastest growth rate since 2010.

However, the ONS cautioned that the current rate of economic growth was still well below the rate experienced during previous recoveries from recessions since 1945 - during which the economy has typically enjoyed a short burst of growth as it caught up with its pre-recession level.

The revised data confirmed that all four major sectors of the economy - services, industry, agriculture and construction - had expanded during the three months to June.

However, only the service sector has grown steadily since the 2008-09 recession ended, while the UK's manufacturing sector had previously continued to contract.

'Positive news'

The latest ONS release showed that exports playing a bigger role than expected in boosting growth.

Exports rose 3.6% from the previous three months, helped by the weak pound and a bottoming-out of the eurozone economy, while imports increased 2.5%, meaning that the country's deficit would have narrowed.

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"The expenditure breakdown was positive news," said Philip Rush, economist and investment bank Nomura. "Consumption obviously fairly important to the recovery there but... the recovery in the second quarter wasn't as reliant on consumption as we'd feared."

Most economists agree that for the recovery to be sustained, the UK economy needs to rebalance away from the consumer spending that helped drive the boom in the last decade, with greater reliance on industry, investment and exports.

Investment spending by businesses rose 1.7% - still a somewhat tepid rate during an economic recovery - while government spending rose 0.9% despite spending cuts in Whitehall.

The latest index of service sector activity, also published by the ONS on Friday, showed output in the sector was 2.8% higher in June than a year earlier, led by financial services, and hotels and restaurants.

"Barely months after the threat of a triple dip, a series of good economic results for the UK means business and consumer confidence is climbing," said Nancy Curtin, analyst at asset managers Close Brothers.

"A London-led recovery has spread to the regions. Like the US, the UK has shown its resilience in the face of slowing global trade."

On the currency markets, the pound jumped half a cent against the dollar on the news, to $1.563, as traders priced in expectations that the Bank of England was more likely to rein in its monetary stimulus in the coming months and years.


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