UK GDP perks up in second quarter despite manufacturing recession

Mae Love
August 12, 2018

It comes after growth slumped to 0.2 per cent amid frosty weather brought in by the "Beast from the East" in the first quarter.

June's GDP showed a "meagre" rise, he added, showing that the economy has "little momentum" heading into the third quarter, with the downside surprise largely coming from flat services output and the expenditure breakdown suggesting "consumers have started to adopt a more cautious mindset", with household spending up only 0.3% quarter-on-quarter in real terms.

Sterling, shaken over the last week by growing talk of a no-deal Brexit, was little moved by the data which painted a familiar picture of growth led by the services sector while businesses were reluctant to raise investment much.

The feel-good factor from England's performance in the World Cup - where the team reached the quarterfinals - is also said to have boosted growth.

The ONS said business investment expanded 0.5 percent quarter-on-quarter, only barely outweighing a 0.4 percent drop in the first three months of the year. Finance minister Philip Hammond said Brexit uncertainty was having a "depressing effect" on Britain's economy but he said growth would pick up to pre-referendum levels if the European Union accepted London's plan for their new relationship.

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The UK economy grew by 0.4 % in the second quarter of 2018, up from 0.2% in the previous quarter, according to the latest figures from the Office for National Statistics.

But growth slowed on a monthly basis, with GDP rising just 0.1 per cent in June, down from 0.3 per cent in May and lower than the 0.2 per cent growth logged in April.

Quarterly growth in household spending quickened slightly to 0.3 percent from 0.2 percent in the first quarter, but stood only 1.1 percent higher than a year ago - the weakest annual increase since early 2012.

The ONS noted that the figures included the "second consecutive quarter of negative growth in manufacturing", meaning the sector was technically in a recession. More recently, wages have risen more quickly than inflation but there have been signs that household finances remain stretched.

"Indeed a rather less than encouraging assessment of the UK's economic prospects can be found in the performance of the pound, which has slipped back below $1.30 against the dollar in the last week, despite a rise in United Kingdom interest rates".

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