UK GDP growth quickens to 0.6% in Q2

The UK's economy has picked up pace in the second quarter by registering a 0.6-per cent expansion over the first quarter, with all its major components registering positive growth for the first time since the third quarter of 2010, according to preliminary data released by the Office for National Statistics (ONS) yesterday.

Hailing the latest figures which were in line with market expectations, chancellor of the exchequer George Osborne said commented that there is still a long way to go.

''GDP stats better than forecast. Britain's holding its nerve; we're sticking to our plan, the economy is on the mend. But still a long way to go,'' Osborne said.

The Q2 growth was double the 0.3-per cent growth in the first quarter following acontraction  of  0.2-per cent in the December quarter, and the first growth in two successive quarters in the last two years. The GDP rose 1.4 per cent compared with the same quarter a year ago.

All the four major components of the GDP - production, construction, services and agriculture grew in the quarter, kindling recovery hopes in European Union's second-largest economy amid prolonging eurozone debt crisis, a subdued US growth and a slowdown in the world's emerging markets.

According to the ONS, the country's economy has recovered more than half of its 7.2-per cent fall during the 2008-2009 recession. In Q2, the GDP is estimated to be 3.3 per cent below the peak level in Q1 2008.

The services, which accounts for about 80 per cent of the country's economy, has grown by 0.6 per cent, contributing 0.48 percentage points to the GDP growth following a 0.5-per cent rise in the first three months. Within the sector, activity was particularly strong in the hotels, restaurants and distribution businesses which expanded 1.5 per cent in the quarter.

Production industries grew by 0.6 per cent, following a 0.3-per cent increase in the previous quarter, with manufacturing increasing by 0.4 per cent after a negative growth of 0.2 per cent in Q1.

The construction output increased by 0.9 per cent in the June quarter after hitting a 1.8-per cent negative growth in the previous quarter, its lowest level since Q1 2001.

According to some analysts, the production and construction industry figures are still well below their pre-recession levels in 2008, due to lack of investment in the sectors by companies sitting with huge cash.

Agriculture output increased by 1.1 per cent in the second quarter compared with a 6.3-per cent decrease in the first quarter.

The ONS's preliminary GDP estimate is based on around 44 per of the total data on economic activity. The second estimate will be published on 23 August, which will include data on consumer and government spending, investment and exports.

The Bank of England is due to meet on monetary policy next week and Mark Carney, its new governor, is expected to present the committee's views on forward guidance and quarterly forecasts on 7 August.

Analysts expect some monetary easing measures in the light of the latest data and it is widely anticipated that the benchmark interest rate will be kept at the current historic low of 0.5 per cent for the near term.