Surprise rise in economic growth - Economy - News - Moneyfacts


Surprise rise in economic growth

Surprise rise in economic growth

Category: Economy

Updated: 27/08/2010
First Published: 27/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK economy grew by more than originally thought in the second quarter of the year, according to the latest official figures.

The Office for National Statistics said the economy had expanded by 1.2% in the three months to the end of June, revising the figure up from its initial growth estimate of 1.1%.

The figure represents the fastest pace of expansion seen in a single quarter since the start of 2001.

An impressive performance by the construction sector played a major part in the upturn in overall fortunes, having witnessed growth of 8.5% during the quarter.

The surprise rise is encouraging news for the prospects for the UK recovery, but this latest result is widely expected to represent a peak.

With the Government's spending cuts and tax rises imminent, the remainder of 2010 is thought likely to bring weaker economic growth.

Official figures also revealed that business investment in the second quarter was in negative territory.

"The upward revision is certainly an encouraging sign that the UK economy is moving further away from a dip back into recession," said Duncan Higgins, of Caxton FX.

"It's also in line with a run of stronger figures seen from the UK recently, which suggest positive growth in the third quarter."

However, Mr Higgins warns that the upward revision is unlikely to alter the views within the Bank of England, which has kept the base rate of interest at a record low of 0.5% for 18 months in a row.

"Until the impact of the Government's spending cuts on the economy is realised, the Bank will remain extremely cautious," he added.

"Governor Mervyn King has reiterated his promise to keep monetary policy loose to accommodate the austerity measures and the market is fully aware that today's revision is not going to impact his thinking."

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