It comes after the economic recovery shocked critics when GDP growth dropped to 0.4 per cent in the first three months of 2015.
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“As predicted, the services and production sectors led the way providing the bulk of the growth in the last quarter at 0.7% and 1% respectively”.
He said, ‘The acceleration in growth raises questions over how long the Bank of England will be able to maintain interest rates at 0.5%, especially with wages now rising strongly.
But demand from the eurozone has remained weak, weighing on manufacturers.
Economists predict official figures on Tuesday will show GDP growth bounced back in the second quarter after a new-year slowdown. The wildcard has been the performance of the mining & quarrying sector, where output rose by almost eight percent in Q2.
A pick-up in the services sector and a surge in oil and gas production helped the economy back to a level of economic output per head broadly level with the peak reached in the first quarter of 2008, prior to the credit crisis in the autumn of that year.
Martin Beck, senior economic adviser to the EY ITEM Club, commented in a note that: “The sectoral breakdown emphasized the “two-speed” nature of the expansion, with virtually all of the growth coming from the services sector”.
Nandini Ramakrishnan, global market strategist at J.P. Morgan Asset Management agrees that the first interest rate rise will be closer to 2016 than to now, but he added: “The Bank of England will take this data as further signs that the British is healthy enough for a rate rise”.
The construction industry was also flat, continuing its sluggish run since the end of past year. Indeed it looks possible that a minority of policymakers will begin voting for a rate rise as soon as next month, though a majority isn’t expected until early next year.
“Growth staying above its past average of 0.6% was a criterion for policy tightening identified by Mark Carney in a recent speech”.
‘Accordingly, although today’s data may give some ammunition to the more hawkish elements of the Committee, we still think that a rate rise will be delayed until next year, ‘ Redwood added.
But TUC general secretary Frances O’Grady said: “The Government’s economic plan is not delivering what was promised”.
Shadow chancellor Chris Leslie said: “UK growth needs to be stronger than this to withstand mounting instability from Europe, China and the world economy”.
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“We are still seeing a relatively strong UK recovery, based in large part on growing household consumption, which, in turn, has been boosted by the beginnings of a rebound in wages in real terms”.
