28th July 2015
Britain’s economic growth reached 0.7% in the second quarter according to the latest data from the Office for National Statistics.
Growth in the first quarter was a disappointing 0.4% down from 0.8% in the final quarter of 2014.
The figures will increase expectations of an interest rate rise sooner rather than later, with Mark Carney recently suggesting a rate rise was moving closer though inflation of 0% is one factor that could put off a rate rise.
ONS chief economist Joe Grice said: “After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years.”
Ben Brettell, Senior Economist, Hargreaves Lansdown says: “UK economic growth bounced back to 0.7% in the second quarter, having dipped to 0.4% in Q1. Economic output is now 5.2% higher than its pre-crisis peak in the first quarter of 2008. It should be noted that as a first estimate the figure will be subject to revision in the coming months – the ONS calculates its preliminary estimate using less than half the data which will eventually be available.
“As we have come to expect, the services sector contributed the lion’s share of the growth. The sector accounts for three-quarters of the UK economy, and was responsible for 0.5 percentage points of the 0.7% total growth. This will once again raise fears that the economic recovery lacks balance, and is increasingly reliant on consumer spending.
“Manufacturing output fell by 0.3% amid signs that a strong pound is hurting exporters – a Confederation of British Industry survey showed yesterday that factory orders grew at their slowest pace for two years this month.”
“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. Last week’s minutes from its latest policy meeting showed that although the decision to hold rates at 0.5% was unanimous, some members of the Monetary Policy Committee are edging closer to voting for higher interest rates. 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.”