Although the first estimate of GDP is based on data covering only about 40% of the economy’s output in the quarter and over time tends to undergo revisions, at this stage of the data cycle we anticipate a 0.6% quarterly GDP gain. Agriculture output was down 0.7% but slower than first quarter’s 2.3% decline.
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The “mining and quarrying” component of industrial output, which includes oil and gas extraction, rose by 7.8 per cent on the quarter, the biggest increase since 1989. The rate of growth in construction on the other hand was flat, while activity in the agricultural sector fell by 0.7%, according to the Office for National Statistics.
Nick Dixon, investment director at Aegon UK, said: “The welcome rise in second quarter GDP points to full-year GDP growth of 2.5% – 3.0%, underscored by improving business sentiment and rising real earnings being enjoyed consumers”.
Carney has explained that interest rates will have to rise to stimulate economic growth. In addition, output in the economy during the period was 2.6 per cent higher compared to a year ago.
“The UK is far from the reformed, more balanced economy that policymakers hoped would rise phoenix-like from the ashes of the financial crisis”.
The latest GDP figures show that the UK services sector grew by 0.7 per cent in the second quarter, having increased by 0.4 per cent in the opening three months of 2015.
“After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years”, said ONS chief economistJoe Grice.
The acceleration in growth is likely to fuel speculation about an early hike in interest rates, which have languished at 0.5 per cent since 2009. Manufacturers, in contrast, are being buffeted by the impact of the stronger pound, which is constraining export demand.
The move comes after Bank of England governor Mark Carney warned in a recent speech that the official cost of borrowing could be increased within months.
‘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”.
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Chancellor George Osborne’s March 2011 vision of “a Britain carried aloft by the march of the makers” continued to prove elusive. And while there is a desperate need for affordable homes, construction output remains in the doldrums. “We haven’t seen the rebalancing of the recovery that we should have seen by now”.
