British economic recovery gains momentum

Image: British Sterling pound notes/AFP

Image: British Sterling pound notes/AFP

LONDON, August 23- Britain’s economy grew faster than thought in the second quarter, official data showed on Friday, extending a broadly based recovery.

Gross domestic product (GDP) the total value of goods and services produced in the economy grew by 0.7 percent in the second quarter, the Office for National Statistics said in a statement.

That marked an upgrade from the initial estimate of 0.6 percent expansion.

Growth occurred across all sectors of the economy, with small upward revisions across manufacturing, construction and parts of services.

Second quarter GDP growth has more than doubled from the 0.3 percent expansion that was witnessed in the first three months of the year.

The economy expanded by 1.5 percent in the second quarter, or three months to the end of June, compared with the equivalent period in 2012, the ONS added. That was also up from the previous estimate of 1.4 percent.

Sterling and the London stock market shrugged off the news. Market expectations had been for no change to both figures, according to analysts polled by Dow Jones Newswires.

Britain’s coalition government said the upbeat data showed that the recovery was taking root.

“This data confirms that the British economy is moving from rescue to recovery, supported by balanced growth across the economy,” said a Treasury spokesperson.

“There is still a long way to go, but the economy is on the right track and the government is committed to its economic plan.”

The Conservative Liberal Democrat coalition argues that its ongoing austerity measures are needed to drive down the record budget deficit inherited from the previous Labour administration in 2010.

The ONS added that construction activity expanded by 1.4 percent in the second quarter, up from the initial estimate of 0.9 percent, as the housing market was partly lifted by state schemes that are aimed at stimulating lending to homebuyers.

Factory output grew 0.7 percent in the quarter, up from the prior figure of 0.4 percent, while consumer spending rose 0.4 percent.

There were also upward revisions for output from distribution, hotels and catering firms, as well as business services and finance firms, and the agriculture sector.

Britain’s shrinking net trade deficit, which dropped to £3.2 billion ($5.0 billion, 3.7 billion euros) in the second quarter from a £4.3 billion deficit in the first quarter, also boosted growth as exports hit a record level.

Friday’s data comes one week after news that British retail sales a vital indicator of consumer confidence jumped 1.1 percent in July from June as a heatwave fuelled spending on food, drinks and summer clothing.

“The slight upward revision to Q2 GDP continues the run of good news on the UK economy and the spending breakdown looks reasonably encouraging too,” said Vicky Redwood, chief UK economist at consultancy Capital Economics.

“The initial estimate of a 0.6 percent quarterly rise has been nudged up to 0.7 percent and now looks even better compared to the more modest rises seen in the US and eurozone in Q2.

“As indicated by the timelier retail sales figures, consumer spending played a big role.”

ING economist James Knightley added that the higher estimate of GDP will “boost optimism on the economy”.