UK GDP Growth Revised Up to 1.2%

The UK economy grew slightly faster than initially thought in the second quarter, expanding by 1.2 per cent rather than the 1.1 per cent first estimated.
Financial Times 8/27/2010 12:08:53 PM

That is the fastest quarterly growth the UK has seen since 1999, but comes after the economy contracted by more than 6 per cent during the recession.

Growth was driven by a pick-up in household consumption, which made up about half of the expansion in the economy, but also because of a large swing in inventories, as companies restocked their shelves, having depleted them heavily during the downturn. Government spending growth only made up a small part in the overall increase in activity.

Household consumption expenditure rose by 0.7 per cent after falling in seven of the previous eight quarters.

Inventories rose by £1bn, having fallen by £2.1bn in the first quarter. The extent of the rise in inventories is a sign that the fast pace of growth in the quarter will be hard to maintain, as stock-building effects on growth are usually a shortlived part of recoveries, with companies paring back on new orders once their stocks are replenished.

Separate data also showed that business investment fell 1.6 per cent after a sharp rise in the previous quarter. Construction was revised up to see 8.5 per cent growth in the quarter, from a previous estimate of 6.6 per cent.

An improvement in the balance of trade was another part of the pick-up in growth, as exports rose by more than imports. Although trade did not add anything to growth, in the previous quarter a wider deficit had proved a drag on the economy of 0.9 per cent.

UK GDP Growth Revised Up to 1.2%