Economy rebounds as a feel-good World Cup boosts growth
THE economy has bounced back from a sluggish start to the year to register GDP growth of 0.4pc in spring and early summer on the back of the World Cup festivities and a pickup in construction.
Growth doubled in the three months to the end of June compared with the first quarter, when freezing conditions prompted many builders to down tools. The recovery means Britain has overtaken France in the G7 league table.
Our nearest neighbour grew 0.2pc in the second quarter.
On an annual basis the UK economy has grown by 1.3pc, third out of the four G7 economies to have so far reported their second set of figures for 2018.
The rebound was driven by the services sector, which dominates the economy and grew by 0.5pc in the second quarter. Retail sales surged by 2.1pc, more than reversing the 0.3pc dip in the first quarter.
Overall consumer spending accelerated to grow by 0.3pc, while business defied fears of Brexit uncertainty to grow by 0.5pc.
“The pickup in the second quarter reflects, to some extent, consumers taking advantage of the warm weather and World Cup celebrations,” the Office for National Statistics said.
Construction also recovered after the Beast from the East earlier in the year.
The sector grew 0.9pc in the latest three-month period.
The data will reassure the Bank of England, which raised interest rates last week from 0.5pc to 0.75pc on an assessment that the economy was in better health.
Its chief economist Andy Haldane had anticipated the World Cup boost to spending, voting for a rate rise back in May. Despite the overall improvement some parts of the economy weakened.
Manufacturing output dropped by 0.9pc and energy supply sank by 2.7pc. These figures were partly offset by a 0.7pc improvement in mining and 1.9pc in waste management, but he production sector of the economy still registered its weakest performance since 2012, down 0.8pc.
The trend in the UK’S
production sector improved through the second quarter, however. Britain’s trade deficit also worsened with exports of cars and planes falling and imports rising.
The foreign appetite for British cars from makers such as Jaguar Land Rover fell, while higher gold imports further increased the deficit.
The figures come as forecasts for global trade are cut to account for the escalating tariff battles launched by the Trump administration.
The clashes began with the US decision to impose levies of 25pc and 10pc on steel and aluminium, respectively, on June 1 as the production sector registered its weakest performance since 2012, down 0.8pc. The latest ONS figures show that British metal product production fell by 4.6pc in the second quarter compared with the previous three months.
According to Ruth Gregory, at Capital Economics, net trade had a “whopping” negative impact on economic performance, with a 0.8 percentage point “drag on growth”.
“Even excluding the volatile valuables component, net trade still subtracted 0.5pp from GDP,” Ms Gregory said.
Critics of the decision to raise interest rates were not satisfied by the improving picture.
Though the services sector grew over the quarter, it ground to a halt in June.
Suren Thiru, head of economics at the British Chambers of Commerce, suggested Mark Carney and other policymakers may have been too hasty.
“Despite growth in the second quarter, there is little in the latest data to suggest a sustained upturn in the UK’S economic growth prospects, or evidence to corroborate the Bank of England’s decision to raise interest rates,” he said.