UK GDP rose by 0.6% in the second quarter (0.62% before rounding), in line with an upwardly-revised consensus forecast but below a long-standing 0.8-0.9% projection here.

As suggested in a post on Monday, services contributed more (0.48 percentage points) to quarterly growth than forecast by the consensus – the index of services rose by 0.2% in May after an upwardly-revised 0.3% April gain. This positive surprise, however, was offset by a weaker-than-expected contribution from construction: output grew by only 0.9% last quarter, adding 0.05 of a percentage point to GDP growth versus a forecast here of up to 0.2.

The construction figure, of course, is highly provisional and could well be revised up to show greater consistency with stronger orders and survey data. An official assumption that services output fell back by 0.1% in June is also questionable – the purchasing managers’ services activity index reached a 27-month high last month. The view here is that second-quarter growth will be upgraded by at least 0.1 percentage point as the revisions process unfolds over the remainder of 2013.

The “big picture” confirmed by today’s news is that an economic revival dating back to mid-2012 gathered pace last quarter. The improving trend is illustrated by the red bars in the chart, showing quarterly growth adjusted to exclude changes in North Sea oil and gas extraction and the effects of additional bank holidays and the Olympics. This underlying measure rose from zero in the second quarter of 2012 to 0.1% in the third quarter, then 0.2%, 0.2% and 0.6% last quarter.

Note that this pick-up pre-dated both the funding for lending scheme, which gained traction only in late 2012, and sterling weakness in early 2013 – factors cited by a respected commentator on BBC Radio Four’s Today programme this morning as key drivers of economic improvement. The view here, by contrast, is that the revival in activity from mid-2012 reflected a resumption of real (i.e. inflation-adjusted) money supply expansion from late 2011 – monetary trends lead the economy by about six months, according to the “monetarist” rule.

The real money turnaround since 2011 has been due to a combination of financial recuperation, a fall in inflation and – possibly – policy initiatives in the form of QE and FLS. As explained in a previous post, QE may have boosted the broad money supply by much less than claimed by the Bank of England, since official gilt-buying probably “crowded out” purchases by commercial banks, which have similar monetary effects.

Real money growth, on both broad and narrow measures, has remained healthy through May (June numbers will be released on 29 July), suggesting solid second-half economic performance.

Contrary to some expectations, nominal broad money trends have not slowed significantly since formal QE was suspended in late 2012, while narrow money has accelerated further. Credit leading indicators, meanwhile, have improved, suggesting that lending expansion will support monetary growth during the second half. There is, in other words, no case for additional monetary stimulus currently; such stimulus, indeed, could be counterproductive to the extent that it leaks into prices and causes a larger inflation drag on real money expansion.