UK GDP growth hits 0.6% in Q2

UK GDP rose by 0.6% in the second quarter, according to initial estimates – in line with analysts’ expectations and double the 0.3% figure seen in Q1.

All four major industrial groupings – agriculture, production, construction and services – saw growth during the period, according to the Office for National Statistics.

The services industry contributed that largest boost to growth, contributing 0.48 percentage points to the headline figure.

Construction output increased by 0.9% compared with Q1 2013, when output was at its lowest level since Q1 2001.

The news means the UK’s annual growth rate of 1.4% is the strongest the first quarter of 2011.

“The sectoral breakdown showed that all sectors contributed to growth, pointing to a slightly more balanced recovery than recent data have suggested,” said Vicky Redwood, chief UK economist at Capital Economics.

“But of course, we should not get too carried away. Even a 0.6% quarterly rise is fairly mediocre after such a deep recession and GDP is still 3.3% below its peak. And with households’ real pay still falling, bank lending flat and public sector austerity measures building, the economy may struggle to maintain its recent rate of growth in the second half of this year.

“Nonetheless, evidence is building that the economy is gradually getting back on its feet.”

The firmer signs of recovery make it all the more important for Bank of England Governor Mark Carney to reassure markets that interest rates will stay low even as the recovery gathers further momentum, she added.

That makes the likelihood of the Bank issuing “forward guidance” in the near future an even stronger possibility.

This article was previously published on Investment Week

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