Manufacturing and construction estimates were upgraded while GDP figure for second quarter unrevised at 0.7%
Britain's economic recovery is on a steady course after stronger-than-expected growth in manufacturing and construction output offset falls in consumer and government spending during the second quarter of the year.
The Office for National Statistics said GDP was unrevised at 0.7% in the three months to the end of June and the trade deficit narrowed to £5.5bn from £6.3bn in the first quarter, leading several analysts to forecast even stronger growth in the second half of the year.
The improving picture will add to pressure on the Bank of England to explain its new policy of forward guidance, which has set a target for unemployment that it says is likely to be reached in 2016, but could arrive earlier should this year's rise in GDP be maintained.
Chris Williamson, chief economist at the financial data provider Markit, said: "The UK economic recovery gained momentum in the second quarter, and a further acceleration of growth looks likely in the third quarter in what's looking like an increasingly broad-based and sustainable-looking upturn."
The ONS said industrial production rose 0.8%, upgraded from 0.6%, while manufacturing output jumped by 0.9%, up from a previous estimate of 0.7%. Construction output surged 1.9%, up from a prior estimate of 1.4%.
However, Vicky Redwood, chief UK economist at Capital Economics, pointed out that much of the rise in these sectors was accounted for by stock building rather than sales.
The reliance on stock building for growth was emphasised by a more modest rise in household spending of 0.3%, while export growth slipped to 3.0% from the previous estimate of 3.6%.
Redwood said: "The breakdown now looks a bit less favourable than before. In particular, stock building is now thought to have accounted for about a third of the rise in GDP, whereas the contributions from consumer spending, investment and net trade have all been revised down.
"And there are some other slightly disappointing revisions. The annual rate of GDP growth in the second quarter has been revised down from 1.5% to 1.3% and GDP growth in 2012 has been nudged down from 0.2% to 0.1%.
"There are clearly still reasons to be cautious about assuming that the recovery can maintain its recent impressive pace," she said.
Williamson said he recognised that the underlying picture was not all rosy, especially following a steep downward revision to business investment. Instead of growing 0.9%, investment fell 2.7%.
"However, the extent of the revision and the volatility of these numbers should perhaps be seen more as a reminder of how unreliable the GDP statistics can be rather than a genuine cause for concern at this stage."
Annalisa Piazza, a UK economist at Newedge Strategy, said: "Looking ahead, we see chances that GDP might even be stronger, with a 1% quarter-on-quarter [rise] pencilled in for the third quarter.
"That said, the solid performance of UK GDP doesn't seem to convince Bank of England monetary policy committee members that the country needs a less accommodative policy stance.
"In a recent speech, the MPC's Paul Tucker suggested that the UK recovery will remain bumpy. Policymakers are clearly still concerned about the UK's slow productivity growth and the possible negative effects on the labour market. Such a scenario is consistent with the current policy stance."
Article Source : http://www.guardian.co.uk
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