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UK Growth at 9-Year High 2010-09-29

Posted by clype in Money, Statistics.
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The economy grew at its fastest pace in nine years in the second quarter of 2010 and growth in the first three months of the year was revised slightly higher, according to ‘The Office for National Statistics‘ (The ONS) on 2010-09-28.

The economy has bounced back strongly from its deepest recession since World War Two.

The ONS said gross domestic product grew 1.2 per cent in the three months to 2010-06, confirming an estimate published 2010-08 and in line with economists’ forecasts.

The annual rate of growth was also unrevised at 1.7 per cent for the second quarter, as expected, but The ONS raised growth in the first three months of the year to 0.4 per cent from the previous estimate of 0.3 per cent.

  • Sterling rose against the dollar and euro after The ONS data also showed the current account deficit narrowed more than expected in the second quarter.
  • Construction output surged 9.5 per cent during the second quarter, its fastest rate of expansion since 1963 as it caught up after winter disruption.
  • Industrial production grew an unrevised 1.0 per cent on the quarter, and growth in services output was revised down slightly to 0.6 per cent from 0.7 per cent.

However, some economists expect growth to slow due to impending government spending cuts and weak overseas demand.

‘The prospects for growth don’t look particularly stunning at this stage,’ said Mr.Peter Dixon, an economist at ‘Commerzbank‘.

‘It’s hard to see how households can do anything but retrench next year’.

The Bank of England‘ deputy governor Mr. Charles Bean said in an interview on 2010-09-27 that the whole point of the bank keeping policy ultra-loose was to encourage consumers and businesses to spend in the short-term, rather than save.

  • The household savings ratio fell to 3.2 per cent in the second quarter from 5.5 per cent in the first three months of the year, its lowest since Q3 2008.

‘It tells me that in the year ahead we’re likely to see consumption growth come under pressure,’ said Mr. Brian Hilliard, an economist at ‘Societe Generale‘.

‘It’s telling us — not that growth is an illusion — but that it’s being supported by consumption, which is going to be challenged in the coming quarters.’

  • Government spending grew by 1.0 per cent on the quarter, its fastest rate since Q4 2008.

However, growth will suffer over the next few years from The Conservative-Liberal Democrat Coalition’s plans to cut a record budget deficit that hit 11 per cent of GDP in the 12 months to April.

The second-quarter current account data showed that the deficit with the rest of the world narrowed to 7.383 billion pounds from an upwardly revised 11.298 billion pounds in the first quarter.

That was better than expected and reduces the current account deficit to 2.0 per cent of Gross Domestic Product (GDP) from 3.1 per cent in the first quarter.

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