UK: Economy grew by 0.6% during second quarter of 2013

Chancellor of the Exchequer George Osborne meeting staff at Tesco's national distribution centre nea

Chancellor of the Exchequer George Osborne meeting staff at Tesco's national distribution centre near Rugby yesterday - Credit: PA

The UK economy notched up successive quarters of growth as gross domestic product (GDP) rose 0.6% in the second quarter of the year, official figures showed today.

It was the first time since 2011 that the UK has seen back-to-back quarterly increases, after a 0.3% rise at the beginning of this year.

The Office for National Statistics figures showed all the main sectors of the economy grew for the first time since the third quarter of 2010, adding to hopes for a recovery.

The powerhouse services sector, which represents three-quarters of the economy, represented the bulk of the increase, as it expanded by 0.6%.

Within this area, business services and finance rose 0.5% after slipping back in the first quarter, with architectural and engineering activities making the strongest contribution.

Hotels, restaurants and distribution also contributed to the services improvement, growing 1.5%.

Gains in the beleaguered construction and manufacturing sectors, still well below their 2008 peaks, will be especially welcome.

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Construction, boosted by Government initiatives to stimulate home buying, rose 0.9% after falling 1.8% in the previous quarter.

Manufacturing also saw a turnaround in fortunes, picking up 0.4% after a 0.2% fall last time. It contributed to an overall increase in the production sector of 0.6%.

But production remains 13.4% off its 2008 peak, with construction still 16.5% down. Overall GDP was 3.3% below the peak.

Prime Minister David Cameron said the figures were “encouraging” and showed the UK was on the “right track”.

He wrote on Twitter: “Today’s economic growth figures are encouraging. We are on the right track - building an economy for hardworking people.”

Chancellor George Osborne tweeted: “GDP stats better than forecast. Britain’s holding its nerve, we’re sticking to our plan, the economy’s on the mend. But still a long way to go.”

Vicky Redwood, chief UK economist at Capital Economics, said: “The provisional estimate of Q2 GDP confirms that the recovery has gathered momentum in the last three months.

“The 0.6% quarterly rise was double Q1’s 0.3% increase and in line with both expectations and the picture already painted by the monthly data and the business surveys. The sectoral breakdown showed that all sectors contributed to growth, pointing to a slightly more balanced recovery than recent data have suggested.”

However, she added: “Of course, we shouldn’t get too carried away. Even a 0.6% quarterly rise is fairly mediocre after such a deep recession and GDP is still 3.3% below its peak.

“And with households’ real pay still falling, bank lending flat and public sector austerity measures building, the economy may struggle to maintain its recent rate of growth in the second half of this year.

“Nonetheless, evidence is building that the economy is gradually getting back on its feet. The firmer signs of recovery make it all the more important that the MPC reassures the markets that interest rates will stay low even as the recovery gathers further momentum, so the committee is still likely to implement ‘forward guidance’ at its next meeting.”

Neil Bentley, deputy director-general at the CBI, said: “The economy has performed strongly and looks to be building up a head of steam for the rest of the year.

“This confirms our view that we are heading down the road to recovery, even if there are likely to still be a few bumps ahead.

“Underlying conditions are quite weak as consumers are still saddled with debt and despite the global economy picking up, the potential for getting knocked off course remains.

“It’s critical the Government renews its efforts to secure a balanced recovery, using investment and trade as its building blocks.”