UK GDP growth has been confirmed at 0.7 per cent for the second quarter, beating economist estimates and an increase on the previous estimate of 0.6 per cent. It's not all good news though - as government spending is also up by 0.9 per cent.
This second estimate of GDP growth by the Office for National Statistics saw manufacturing growth revised to 0.7 per cent from 0.4 per cent.
Some will take this as a sign of rebalancing, but while there is some improvement manufacturing output still remains 10 per cent below peak. Service sector output by contrast is just 0.2 per cent below its pre crisis high in the first quarter of 2008.
Exports rose 3.6 per cent in the second quarter, with imports up 2.5 per cent.
Jeremy Cook, chief economist at the foreign exchange company, World First:
Stronger growth via a 0.7% increase in manufacturing, and exports rising 3.6% is the kind of GDP that we need here in the UK; whisper it but these are signs that the UK economy may, finally, be rebalancing itself.
Overall, 1.5% is the strongest year on year growth that the UK has seen since the Q1 of 2011 and although there are things to be unhappy about – the 0.9% increase in government spending for example – this figure will hopefully increase the belief that the UK economy is actually going through a recovery which has a lot more sustainable components than our previous false dawns.
We are still a long way behind pre-recession levels, and therefore, I expect that 0.7% will not be classed as ‘exit velocity’ by the Bank of England and the loose monetary policy of low rates and additional QE spending will be carried further than the market currently expects.
Vicky Redwood, chief UK economist, Capital Economics:
Looking ahead, the economy still faces some serious constraints (the fiscal squeeze, weak bank lending), so it may struggle to keep growing at quite such robust rates. Indeed, the monthly services output figures released today show that momentum in the largest part of the economy slowed throughout the course of Q2.
Nonetheless, the outlook has become a bit brighter and we recently revised up our forecasts to 1.2% growth this year and 2% next.