23rd Aug 2013 11:24
LONDON (Alliance News) - The rebound in exports and strong investment helped the UK economy to expand at a faster-than-initially-estimated pace in the second quarter.
The economy expanded 0.7 percent sequentially in the second quarter, the Office for National Statistics said Friday. The rate exceeded the initial estimate of 0.6 percent and the first quarter's 0.3 percent expansion.
Gross domestic product increased 1.5 percent from the same period of last year, instead of 1.4 percent.
The production-side breakdown showed that the 0.1 percentage point revision in sequential growth largely reflects improvement in construction and manufacturing.
As initially estimated, production grew 0.6 percent, the largest since the fourth quarter of 2010. The dominant service sector also expanded 0.6 percent, matching preliminary estimate.
Meanwhile, manufacturing output growth was lifted to 0.7 percent from 0.4 percent. Likewise, the increase in construction output was revised up to 1.4 percent from 0.9 percent.
On the expenditure front, net trade contributed the most to the economic growth. Exports climbed 3.6 percent, the biggest since the fourth quarter of 2011, and imports rose 2.5 percent in the second quarter, adding 0.3 percentage point to GDP.
The ONS said the deficit in net trade totaled GBP 3.2 billion, compared with a shortfall of GBP 4.3 billion in the prior quarter.
Further, data showed that household spending and government expenditure grew by 0.4 percent and 0.9 percent, respectively from the prior quarter. At the same time, gross fixed capital formation surged 1.7 percent.
Including the alignment adjustment, the level of inventories decreased by GBP 1 billion in the second quarter.
A separate report from the ONS revealed that business investment rose 0.9 percent in the second quarter from the prior quarter, but it fell 3.5 percent on a yearly basis.
Services output was flat in June from the previous month, when it grew 0.2 percent. Economists had forecast output to edge up by 0.1 percent.
The Confederation of British Industry earlier this week lifted its 2013 growth outlook for the UK economy to 1.2 percent from 1 percent, citing an increase in disposable income and investment.
Looking ahead, Vicky Redwood, chief UK economist at Capital Economics said the economy still faces some serious constraints including the fiscal squeeze and weak bank lending, so it may struggle to keep growing at quite such robust rates.
With inflation remaining sticky and the economy continuing to create jobs, James Knightley at ING Bank NV said he continues to believe that the first Bank of England rate hike is more likely to come in early 2015, rather than the third quarter of 2016 at the earliest as suggested by the BoE.
BoE Governor Mark Carney earlier this month announced that the policymakers will not hike interest rate from the current 0.5 percent at least until the unemployment rate has fallen to a threshold of 7 percent.
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