UK rallying faster than thought as exports leap boosts GDP

Hopes are boosted for rebalancing of economy towards trade and investment

The UK’s recovery was even faster than orginally thought between April and June as a surge in exports helped the economy expand 0.7 per cent, official figures revealed yesterday.

The Office for National Statistics revised its headline growth figure up from its original 0.6 per cent estimate, already twice as fast as the 0.3 per cent  advance seen in the first quarter of 2013.

Encouragingly for hopes of a rebalancing of the economy towards trade and investment, exports jumped by an impressive 3.6 per cent between April and June. Net trade contributed almost half of the GDP growth over the quarter, adding 0.3 percentage points.

While good news for the Chancellor George Osborne, pictured, the latest signs of improved growth put further pressure on the Bank of England’s new forward guidance policy. Governor Mark Carney has pledged to hold interest rates at their record low of 0.5 per cent until the unemployment rate falls to 7 per cent, which the central bank estimates will not happen before 2016.

But City analysts said that the latest positive GDP figures made it more likely the bank would raise rates sooner as unemployment falls more quickly. Money markets are pricing in a rate rise in March 2015.

Simon Wells, the chief UK economist at HSBC, said: “While welcome, it could add to the difficulties the Bank of England is having in convincing financial markets about its forward policy guidance. Things could get even more difficult as the Bank’s forecast for Q3 growth of 0.5 per cent looks a little low to us.”

Economists rushed to lift their growth forecasts in the wake of the figures. Investec’s Philip Shaw now expects growth of 1.3 per cent this year, twice as fast as the Office for Budget Responsibility’s 0.6 per cent estimate in March. “This is hardly boom territory, but by the standards of recent years growth at this pace would be very welcome,” he said.

Business investment, which has slumped by more than 20 per cent since 2008, also showed signs of life, growing by 0.9 per cent. Workers’ pay jumped by 2.4 per cent, the highest quarterly increase since 2000, although the ONS said this was partly due to high earners delaying bonus payments from the first quarter to take advantage of the cut in the top income tax rate.

Household spending rose 0.4 per cent in the second quarter, the seventh quarterly rise in a row, contributing around a third of the quarter’s growth. Despite the Chancellor’s austerity drive, government spending was up 0.9 per cent.

Colin Edwards, an economist at the Centre for Economics and Business Research, said: “This growth is unlikely to go on indefinitely. Once the next election is in the rear-view mirror, the new government will be left with the same task of revisiting belt-tightening in earnest, acting as the drag on growth.” The upward revision was also driven by a better-than-expected performance from the construction sector, which rose 1.4 per cent, up from the ONS’s first estimate of 0.9 per cent.

In a further possible hopeful sign for Britain’s exporters, German GDP figures yesterday showed a healthy increase in domestic demand.

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Highs and lows of the cast's careers since 2004
News
news
New Articles
i100... with this review
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam