Consumer spending edges up at last

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The Independent Online
CONSUMER spending, a barometer of domestic demand, has risen for the first time in two years, official figures confirmed yesterday.

But latest statistics on new construction orders underline that some sectors of the economy are as far from recovery as ever.

Final gross domestic product figures for the second quarter, released yesterday after provisional estimates last month, showed that consumers spent pounds 67.1bn in the three months to June after adjusting for inflation, up 0.5 per cent from the first quarter.

The spending increase was supported by data confirming that the non-oil economy grew by 0.1 per cent over the three months, the first increase in seven quarters, the Central Statistical Office said.

Economists warned against reading too much into the GDP figures, which were probably boosted by a short-lived burst of post-election optimism.

Meanwhile, recent market developments have overtaken yesterday's figures and the economic outlook has changed.

Ian Gunner, an economist with Chase Investment Bank, said that with sterling suspended from the exchange rate mechanism, the pound devalued by nearly 10 per cent and domestic loan rates now at 9 per cent, 'we are in a different ball game and this data is largely irrelevant.

'People are now doing their sums on what the new monetary policy framework means for growth. Better times are ahead, but it won't happen overnight.'

Fixed investment across the economy fell 2.5 per cent between the second and third quarters to pounds 17.5bn. Destocking by manufacturers was relatively light, suggesting weak demand.

The Environment Department said construction orders fell a seasonally adjusted 11 per cent in the three months to July and were down 16 per cent on the same period last year. These figures may remain depressed for as long as two years because of excess capacity in the property market.