U.K. economic growth accelerated in the second quarter, helped by consumer spending, after stronger-than-estimated expansion in the first quarter of the year.
Household expenditure rose 0.3 percent and disposable income increased 1.5 percent, the most in a year, the Office for National Statistics said today in London. The increase in income was partly due to the timing of bonus payments. Gross domestic product rose 0.7 percent, matching the previous estimate, following 0.4 percent expansion in the January-March period.
Britain’s economy has shown further signs of strengthening this quarter after a recession that’s left GDP 3.3 percent below its previous peak. While the recovery is gathering momentum, Bank of England policy makers speaking this week emphasized their commitment to keeping the key interest rate at a record low at least until unemployment drops to 7 percent and there is sustainable growth.
“The recovery seems to be strengthening and it’s likely that third quarter GDP figures are even firmer,” said Philip Shaw, economist at Investec Securities in London. “This momentum probably won’t be maintained indefinitely but the indications are that the economy really has turned a corner.”
Government spending rose 0.5 percent in the second quarter after a 0.2 percent drop in the first three months of the year, the ONS said.
Exports rose 3 percent and imports increased 2.9 percent. Net trade made zero contribution to GDP in the quarter. That’s down from a previous estimate that net trade added 0.3 percentage point to GDP.
In the second quarter, there were upward revisions to agriculture, production and construction. Services was unchanged compared with the previous estimate.
The savings ratio in the three months through June rose to 5.9 percent from 4.4 percent. Debenhams Plc Chief Executive Officer Michael Sharp said this month that the retail market remains “competitive” and “consumers’ disposable income remains under pressure.”
Britain is in the midst of its political party conference season less than two years before the next general election, with the opposition Labour Party concluding its meeting in Brighton, England yesterday. Party leader Ed Miliband accepted a recovery was underway while criticizing its speed, saying it was the slowest for 100 years.
While today’s data shows GDP is 3.3 percent below its peak in 2008, it’s 2.2 percent higher than it was when Prime Minister David Cameron’s coalition government came to power in 2010.
Labour’s lead over Cameron’s Conservative Party has narrowed to single digits over the past year, with the government party benefiting in part from the stronger economy and an improvement in consumer confidence.
The Tories will meet in Manchester next week. Their junior coalition partners, the Liberal Democrats, concluded their conference in Glasgow last week with leader Nick Clegg saying his party has ensured the recovery is stable.
In today’s ONS report, GDP data for third quarter of 2012 was revised to 0.6 percent from 0.7 percent. The fourth quarter was revised to a drop of 0.3 percent from a decline of 0.2 percent and the first three months of 2013 were revised higher to growth of 0.4 percent from 0.3 percent. For all of 2012, growth was revised to 0.1 percent from 0.2 percent.
In a separate report, the statistics office said business investment fell 2.7 percent in the second quarter from the first and was down 8.5 percent from a year earlier.
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