UK GDP boost: What the economists are saying

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Figures published by the Office for National Statistics show the UK economy expanded by 0.6 per cent in the second quarter of 2013, on the back of broad-based growth .

Chancellor George Osborne says the figures show the UK economy is “on the mend, although economists have cautioned that the outlook for the rest of year remains uncertain.

Royal London Asset Management economist Ian Kernohan
“Second quarter UK GDP growth of 0.6 per cent was not an unexpected result, given the strength of business survey data over the past few months. The debate will now move on from a misplaced obsession with so-called double and triple dips, to whether the weakest recovery on record is finally gathering pace. Stronger data from Europe will add to the sense that the UK economy has finally turned a corner, although the new governor of the Bank of England will be keen to stress that a rise in interest rates is still a long way off, in order to allow time for the recovery to gain traction.”

Schroders European economist Azad Zangana
“Within the details, almost 70 per cent of the GDP growth seen in the second quarter came from the services sector. Production, including manufacturing, grew by 0.6 per cent, while the construction sector also grew by 0.9 per cent. The estimates released today are preliminary, and may be revised up or down. However, it appears that the economic recovery is broadening out, with every major sub-sector making a positive contribution.

“The Bank of England, which is currently considering the next evolution in monetary policy, has a challenge in deciding whether the latest data supports the view that the economy is now strong enough to continue its recovery without more monetary stimulus, or whether the headwinds of public sector austerity and household deleveraging require monetary activism to offset some of the downside risks.”

Deutsche Bank chief UK economist George Buckley
“Only Italy among the G7 is further below its peak than the UK. And US GDP in Q1 (the latest figures we have – the Q2 report is due in just under a week’s time) is about the same above its peak as the UK’s is below. The recovery since the middle of 2009 has been weaker than normal recoveries – over the past four years since the UK emerged from the great recession of 2008-09 the average annualised pace of GDP growth has been just 1 per cent, compared to a normal ‘recovery rate’ of more than 3 per cent since the early 1800s.”

Capital Economics chief UK economist Vicky Redwood
“We should not get too carried away. Even 0.6 per cent quarterly growth is fairly mediocre after such a deep recession and GDP is still 3.3 per cent below its peak. And the strength of the recent pick-up has been a bit surprising given the lack of any obvious drivers for growth. With households’ real pay still falling, bank lending still flat and the public sector austerity measures building, the recovery may struggle to maintain its recent growth rate in the second half of the year.

“That said, given the boost to the ‘feel-good’ factor from the recent run of events (good weather, Royal baby etc.), it looks like the recovery will maintain its momentum into the start of the third quarter at least.”

IHS Global Insight chief UK and European economist Howard Archer
“The fact that the recent improvement in economic activity has occurred across a wide range of sectors is particularly encouraging and reinforces hopes that the UK economy really is moving to a firmer footing.

“While we doubt that the economy will be able to sustain the second quarter growth rate, we anticipate that it should be able to achieve steady if unspectacular expansion through the second half and beyond. As such, we expect GDP growth to come in at 1.1 per cent in 2013 and 1.8 per cent in 2014.”