UK economy shows quarterly surge in growth

23 July 2010

The UK economy expanded at twice the forecast rate during the second quarter of the year.

The Office for National Statistics reported that GDP rose by 1.1 per cent in the period from April to June. Predicted growth had been for around the 0.6 per cent mark.

The rate of growth was four times higher than for the first quarter (0.3 per cent) and the highest since 2006.

Output in the construction industry jumped 6.6 per cent on the quarter, rebounding after bad weather affected the start of the year.

But the main driver behind the improvement was the upturn in the services industry, which saw a 0.9 per cent boost in output, three times better than in the first three months of 2010.

The last time the UK enjoyed such impressive quarterly growth figures was 1999.

Experts, however, warned against premature optimism that the recovery might be accelerating.

Jonathan Loynes of Capital Economics said: “The second quarter’s much stronger than expected rise in UK GDP is a pleasant surprise, but is likely to prove as good as it gets as far as the pace of economic recovery is concerned.

“There are two reasons not to get too over-excited. First, while strong by any ordinary standards, the second quarter’s gain in GDP is less impressive in the light of the sharp falls seen during the recession. There were two quarters when GDP fell by more than 2 per cent and activity is still over 4 per cent below its first-quarter 2008 level.

“And second, with recent business surveys weakening and the fiscal squeeze looming, the second quarter looks very likely to be the peak in terms of the pace of growth – expect a much weaker second half.”

It was a view echoed by Graeme Leach, chief economist at the Institute of Directors: “The latest quarterly GDP figures were good news, but we think they’re likely to be as good as it gets. We do not think this rate of growth can be maintained.”

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