Second-quarter economy grows on rising consumer spending

UK economic growth accelerated in the second quarter, helped by consumer spending, after stronger-than-estimated expansion in the first quarter of the year.

Household expenditure rose 0.3% and disposable income increased 1.5%, the most in a year, the Office for National Statistics (ONS) said yesterday.

The increase in income was partly due to the timing of bonus payments, which were deferred to take advantage of a tax change. Gross domestic product (GDP) rose 0.7%, matching the previous estimate, following 0.4% expansion in the January-March period.

Britain’s economy has shown further signs of strengthening this quarter after a recession that’s left GDP 3.3% below its previous peak. While the recovery is gathering momentum, Bank of England policy makers speaking this week emphasized their commitment to keeping the key interest rate at a record low at least until unemployment drops to 7% and there is sustainable growth.

“UK GDP is on a strong pace, but not enough to close ample output gap,” said Annalisa Piazza, ananalyst atNewedgeGroupin London. “The solid performance doesn’t seem to convince MPC members that the country needs a less accommodative policy stance.”

In a separate report, the statistics office said business investment fell 2.7% in the second quarter from the first and was down 8.5% from a year earlier. The ONS had estimated that investment rose 0.9% in the previous GDP report.

The pound fell against the dollar after the data were published, and traded at US$1.6049 as of 9.32am London time, down 0.2% from Wednesday.

Government spending rose 0.5% in the second quarter after a 0.2% drop in the first three months of the year. Exports were up 3% and imports increased 2.9%. Net trade made a zero contribution to GDP in the quarter. That’s down from a previous estimate that net trade added 0.3 percentage point to GDP.

In the quarter, there were upward revisions to agriculture, production and construction. Services was unchanged compared with the previous estimate.

The savings ratio in the three months through June rose to 5.9% from 4.4%. There was a 3.4% increase in compensation of employees in the second quarter.

DebenhamsPlc chief executive officerMichael Sharp said this month that the retail market remained “competitive” and “consumers’ disposable income remained under pressure.”

Britain is in the midst of its political party conference season less than two years before the next general election, with the opposition Labour Party concluding its meeting in Brighton, England on Wednesday. — Bloombergh

Repsol SA’s US$10bil project to pump oil off Spain’s Canary Islands has passed a milestone when the public comment period ended on its environmental-impact report, drawing criticism from conservationists and residents.

The study next will be reviewed by the Agriculture, Food and Environment Ministry, according to a spokeswoman at the agency who asked not to be identified, citing government policy. She wouldn’t estimate a time frame for a decision.

The ministry can impose extra conditions on Madrid-based Repsol to prevent oil spills or protect marine wildlife habitats.

Spain’s biggest oil company is counting on approval so it may begin by late 2014 to explore for reserves it says could equal about 10% of national consumption.

Repsol sought permission to drill two or three wells at least 50km from Fuerteventura and Lanzarote, two Canary islands off northern Africa whose economies depend heavily on tourism.

The Spanish unit of environmental advocate WWF said the report, which ran more than 1,000 pages and was compiled by consultant Alenta Medio Ambiente SL, was “plagued with omissions, vagueness and imprecision” that hampered an objective review of the project.

The local government of Lanzarote on Wednesday delivered a list of arguments against aspects of the project, drawn up with 20 experts and five universities.

“Our environmental report is thorough and complete, complying with the existing legislation and in some aspects going beyond it,” Repsol spokesman Kristian Rix said in an emailed response to questions. — Bloomberg