UK economy stronger into mid-year, reflecting services
Thursday, August 24, 2017 at 11:26AM
Simon Ward

UK GDP grew by 0.3% in the second quarter, unrevised from last month’s preliminary estimate, but monthly output figures indicate a recovery in momentum through the quarter, suggesting stronger third-quarter expansion.

The 0.3% second-quarter rise reflected growth of 0.5% (0.54% before rounding) in services output, which accounts for 79% of GDP. Industrial and construction output weakened slightly last quarter.

The demand breakdown shows that GDP growth was driven by a rebound in inventories after first-quarter destocking along with a solid increase in public spending (both consumption and investment) and modest private consumption expansion. Business investment was flat both on the quarter and from a year earlier.

Monthly output data indicate that GDP was unchanged from its first-quarter level in April but rose by 0.2% and 0.4% respectively in May and June, reflecting services strength – see first chart. The June level was 0.35% above the second-quarter average, implying significant “carry-over” to the third quarter.

Slower GDP growth in the first half followed a fall in six-month real non-financial M1 expansion from a peak in June 2016 – second chart. Real narrow money growth bottomed in April and recovered in June, suggesting improving prospects for late 2017 / early 2018; July monetary data will be released on 30 August.

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