The improved growth forecast of 0.7 per cent for the UK does not paint the whole picture, according to investment experts.
The Office for National Statistics recently increased its estimation for UK economic growth in the second quarter, increasing this figure from 0.6 per cent to 0.7 per cent.
However, JP Morgan Asset Management global market strategist David Lebovitz points to the fact that July 2013 was the first time the UK had to borrow money in that month since 2010.
Lebovitz says: “Yes, the data is getting better but it will be a long and winding road. It is important to remember that growth has been sluggish and that it will take a while. I think it is a covering reminder we are not out of the woods yet.”
In terms of recovery, Lebovitz points to the importance of the UK consumer. Lebovitz adds: “I think there is an element of consumer confidence that is overlooked. There is a difference between what the numbers say and how people feel.
“And the details were pretty good in terms of consumption and compensation, so it appears the consumer is coming back.”
Standard Life Investments global thematic strategist Francis Hudson points to the importance foreign markets play to UK growth and that the economy is vulnerable to events in these markets.
“We have suffered because the rest of the world has not been growing. If we pin our hopes on exports then who do we export to?,” she notes.
Additionally, Hudson – who says in general she is not bearish on the UK – is mindful of how this data is being viewed and the post-crisis context in which it features.
Hudson adds: “It is not a very positive figure unless people’s expectations have been reduced to the point where these figures look reasonable. I think a pre-crisis mindset plays into this sentiment.
“And with general inflation higher than growth, then growth in nominal terms is not real. We want confidence that growth will continue.”
Rathbone Unit Trust Management chief investment officer Julian Chillingworth is more confident about the GDP increase.
“The solace that can be taken is that is is a gradually improving trend. We continue to believe the UK economy will see traction – it has been helped by housing and employment prospects,” he says.
In terms of vulnerability to other markets, Chillingworth is dismissive of volatility from China and recognises the long term view here.
Chillingworth says: “Obviously the market is fixated by the short-term regime in China but we need to wait for the long-term transition to consumption to be completed.”