Services and building join slowdown

THE SLOWDOWN in the economy is spreading, with construction showing a sharp fall in output in the second quarter and activity in services at its weakest for nearly two years.

But the picture of moderating growth painted in the latest figures on national output published yesterday was at odds with a pick-up in bank and building society lending in July, and an unexpectedly sharp acceleration in money supply reported by the Bank of England.

The mixed signals left analysts more convinced that interest rates are likely to be left on hold for some time. Stephen Hannah, chief economist at IBJ, said: "The consumer still seems fairly robust. There would be have to be a very marked slowdown in money supply as a prerequisite for even contemplating a cut in interest rates."

The latest output figures showed that gross domestic product (GDP) grew by 0.5 per cent in the second quarter. Excluding oil and gas, growth was a modest 0.4 per cent. Within the total, manufacturing was up by 0.1 per cent, construction down by 2.6 per cent and services up by 0.6 per cent.

The areas with sharpest growth were oil and gas extraction and electricity, gas and water supply. Output in these sectors was boosted by the cool spring. Excluding the weather effect, GDP growth in the quarter was just 0.3 per cent.

The picture is of an economy which slowed in the second quarter to around trend growth. Compared with a year earlier the economy grew by 2.6 per cent, or 2.4 per cent excluding oil and gas. A year ago, when the Bank of England began to raise interest rates, it was growing at over 3.5 per cent a year.

Consumer spending figures published yesterday showed a slowdown, but spending growth in the quarter was still 0.7 per cent, and the annual rate is 3.8 per cent. Banks and building societies said July consumer lending was the highest this year.

Adrian Coles, director general of the Building Societies Association, said growth in mortgage lending was "slightly surprising" after June's rise in interest rates, but might be a response to "attractive fixed-rate deals on offer".

The Bank of England said the broad measure of money supply - M4 - rose 1.5 per cent in July, taking the annual rate to 10 per cent. Analysts said this was faster than expected but it had been temporarily boosted by inter-bank transactions.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
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

Beverley James: Accounts Payable

£22,000 - £23,000: Beverley James: Are you looking for the opportunity to work...

Beverley James: Accounts Assistant

£30,000: Beverley James: A fantastic opportunity has arisen for a person looki...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Loren Hughes: Senior Finance Analyst

£65,000 - £75,000: Loren Hughes: Are you a post qualified accountant? Do you h...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower