Official data released this week confirm that the economy is growing robustly but were marginally disappointing from the perspective here. The rise in GDP in the second quarter was unrevised at 0.7%, versus an expected upgrade to 0.8%, although first-quarter growth was raised from 0.3% to 0.4%. Services output, meanwhile, increased by “only” 0.2% in July – a larger gain had been suggested by turnover data released last week. All these numbers, of course, remain highly provisional and will probably be revised higher, reflecting a tendency for official statisticians initially to underestimate activity when the economy is accelerating.
The data in hand indicate that GDP in July was 0.5% above the second-quarter level – see first chart. It is reasonable to pencil in monthly increases of 0.3% for August and September based on the strength of survey evidence, suggesting that the first estimate of third-quarter GDP to be released on 25 October will show quarterly growth of 0.8%. The Bank of England, for comparison, was projecting 0.7% expansion at the time of this month’s MPC meeting.
The run of buoyant survey evidence continued today with a further rise in the EU Commission’s UK consumer confidence measure to its highest level since 2005 – second chart. The net percentage of respondents expecting higher unemployment over the next 12 months fell to a 12-year low, consistent with other evidence of labour market improvement and supporting the forecast here of a faster-than-expected decline in the jobless rate – third chart.
