The UK economy is heating up, but it's still pretty cold out there, according to the ONS. GDP grew by 0.6 per cent in the second quarter, up from 0.3 per cent in the first.
GDP is still 3.3 per cent below its first quarter 2008 peak, and this figure is in line with average quarterly growth since 1955 (at ~0.64 per cent). It's the first quarter since the third quarter of 2011 that all four quarters have seen growth.
That figure is in line with what analysts were expecting. But traders seem disappointed as the pound fell against the dollar on the news:
Ben Southwood, Adam Smith Institute:
It's great that the economy is expanding. But this is no time for complacency, we're miles below the previous peak. Some of the recession was necessary adjustment but we're far past that now. The chancellor needs to radically reform monetary policy toward a more rational system like nominal income targeting.
Only something like this can overcome nominal rigidities and put everyone back to work. Obviously this only solves short term problems and there is also a lot of work to do in making taxes more neutral, scrapping subsidies and tearing up regulation.
Kit Juckes, Societe Generale:
The data won’t alter the prospect of super-easy money being in place for a super-long time, and any sell-off at the front end of the sterling curve is an opportunity to buy against the US. How sterling reacts will tell us how to trade EUR/GBP. If the data are as expected and sterling holds current levels against Euro and dollar that would suggest the market is not long GBP. I like being long GBP/USD for a short-term summer trade and short EUR/GBP for a long-term, patient, strategic trade in tandem with long Gilts vs. Treasuries.
Allister Heath, City A.M.'s editor:
We care too much about the total value of goods and services produced by the economy, and insufficiently about why these goods and services are being produced. Are they being financed by excessive infusions of credit, by government hand-outs, or printed money – bad growth – or are they being sold to solvent consumers or firms in the UK or exported abroad in competitive markets – good growth? If today’s GDP expansion turns out to have been caused by the first set of reasons, we are in trouble; if it is the latter, then we will genuinely be adding to our national wealth.