High hopes for economy after GDP figures

Britain’s beleagured economy is finally “on the mend”, said Chancellor George Osborne yesterday.

The hopeful announcement was made after official figures showed a second successive quarter of growth in all four main economic sectors.

The estimate of a 0.6% rise in gross domestic product (GDP) was the first time since 2011 that the UK has seen back-to-back quarterly growth.

BRITAIN’S BELEAGUERED economy is finally “on the mend”, Chancellor George Osborne said yesterday, as official figures showed a second successive quarter of growth.

All four main sectors s h owe d improvement — the first time Britain has been firing on all cylinders for nearly three years, according to the Office for National Statistics.

The estimate of a 0.6% rise in gross domestic product (GDP) was the first time since 2011 that the UK has seen back-to-back quarterly growth, and doubled the 0.3% figure for the last period.

It was in line with expectations but the fact that the struggling construction and manufacturing sectors managed to swing into expansion were seen as particularly encouraging as it suggested a broad-based improvement.

The Chancellor hailed the figures as a vindication of the coalition’s austerity policies, tweeting: “Britain’s holding its nerve, we’re sticking to our plan, the economy’s on ththe mend. But still a lolong way to go.”

Prime Minister David Cameron saida they showed Britain was on theh right track anand “building an ececonomy for hard workingw people”.

Some economists dodoubt that the level of growth can be sustainedu in the secondse half of the yearye given that wages arear still failing to keep pace with inflation.n

While g rowth is seen as likely to cocontinue, they suggest gesuggest it could slip back to around 0.4% for eachea quarter.

Forecasts for the fullfu year are around the 1% mark, with an accelerating rate in 2014.

Yesterday’s 0.6% rise in GDP for the second quarter of 2013 saw services, production, construction and agriculture all up together for the first time since the third quarter of 2010.

The most significant contribution again came from the powerhouse services sector, which represents three-quarters of the economy. It grew 0.6%.

Within this area, business services and finance rose 0.5% after slipping back in the first quarter — with architectural and engineering activities making the strongest contribution.

Hotels, restaurants and distribution also contributed to the services rise as they grew by 1.5%.

Meanwhile the construction sector, which has been bolstered by Government initiatives to stimulate home buying, turned a corner as it rose 0.9% after falling 1.8% in the previous quarter.

Manufacturing also saw a turnaround, picking up 0.4% after a 0.2% fall last time.

It contributed to an overall increase in the production sector of 0.6%.

But manufacturing remains 10.2% off 2008 pre-crisis levels, with construction still 16.5% down. Overall GDP was 3.3% below its peak.

Vicky Redwood of Capital Economics said: “Of course, we shouldn’t get too carried away.

“Even a 0.6% quarterly rise is fairly mediocre after such a deep recession and GDP is still 3.3% below its peak.

“And with households’ real pay still falling, bank lending flat and public sector austerity measures building, the economy may struggle to maintain its recent rate of growth in the second half of this year.

“Nonetheless, evidence is building that the economy is gradually getting back on its feet.”

Picture: PA. George Osborne meets staff at Tesco’s National Distribution Centre near Rugby. The visit came as the UK economy notched up successive quarters of growth as GDP rose 0.6% in the second quarter of the year.