Update: Economic growth figures for first half of 2013 are revised upwards

GDP has been revised upwards for the first two quarters of 2013. GDP has been revised upwards for the first two quarters of 2013.

Friday, December 20, 2013
9:59 AM

The UK economy has grown more strongly than previously thought this year, according to revisions to official figures published today.

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Gross domestic product (GDP) rose by 0.5% in the first quarter of 2013, up from a previous estimate of 0.4%, and by 0.8% in the second quarter, up from 0.7%, the Office for National Statistics (ONS) said.

The figure of 0.8% for the third quarter remains unchanged but the revisions mean GDP is closer to its pre-recession peak than previously thought.

The revisions also showed that 2012 growth was 0.3%, revised up from 0.1%.

Britain is now said to be 2% off its pre-crisis level at the start of 2008, rather than 2.5% as previously thought, adding to hopes that the end of the prolonged economic downturn is close at hand.

However, a slew of further data from the ONS is likely to fuel concerns about the nature of growth. Britain’s current account deficit with the rest of the world in the third quarter rose to £20.7billion, or 5.2% of GDP, the highest percentage level for 24 years.

It came as the trade deficit widened, UK earnings on foreign investments fell, and foreign earnings on UK investments increased.

Meanwhile household spending in the third quarter was 2.5% higher than a year ago, the highest comparable growth since the first quarter of 2008.

Business investment saw a welcome rise of £800million to £53.6billion compared with the previous quarter, though this has been largely flat over the last four quarters, ranging between £52billion and £54billion.

Elsewhere, public sector borrowing - excluding the effect of bank bailouts - was £16.5billion in November, up £900million on the same month last year.

Central government receipts were up 4.6% to £41.2billion as VAT and the income tax take rose, as did stamp duties, which were up by 23%, or £200million.

Spending by central government fell by 1.8%, or £1billion, to £52.9billion, including a £300million fall in net social benefit expenditure.

However, despite these improvements for Whitehall’s finances, the overall borrowing figure rose because of changes to the way local authorities are funded.

Underlying public sector net debt rose to a new monthly record of 76.6% of GDP, with the previous high of 76.5% set in September.

Revisions to the third quarter performance of the economy showed that the construction sector - buoyed by Government initiatives such as Help to Buy - did better than previously thought.

It grew by 2.6%, revised up from 1.7%. Services also did better, expanding by 0.8% compared with the previous estimate of 0.7%. Manufacturing fared worse, revised down by 0.1% to 0.8% growth.

Howard Archer, chief UK and European economist at IHS Global Insight, said the revisions to past GDP data meant growth for this year is likely to be 1.5% - up from a previous forecast of 1.4% - and could be as high as 1.6%.

But Samuel Tombs, UK economist at consultancy Capital Economics, said the figures sowed doubts about the sustainability of the recovery.

“While the second estimate of quarterly GDP growth of 0.8% in the third quarter was unrevised, the sources of that growth continue to cause some alarm,” he said.

“The economy’s growth spurt seems to be exacerbating existing imbalances in the economy, rather than helping them to heal.”

He said public finance figures also made for “somewhat gloomy reading”, suggesting borrowing could be on course to overshoot the Office for Budget Responsibility’s latest forecast of £111 billion for the 2013/14 fiscal year by around £1 billion.

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