The UK’s economy grew by 0.2 percent in the second quarter, with an unexpected jump in June, according to official figure published on Friday.
The estimated growth in gross domestic product (GDP) was higher than the Bank of England’s (BoE) latest forecast for the second quarter (0.1 percent). Economists polled by Reuters have expected no growth.
The resilience of the economy have reinforced expectations that the BoE is likely to hike its interest rates again in November, although inflating and wage figures are more direct indicators that the bank will need to consider.
According to the ONS, the UK’s GDP bounced up by 0.5 percent in June after falling by 0.1 percent in May because King Charles III’s coronation led to an extra bank holiday.
The growth was faster than the 0.2 percent expected by economists polled by Pantheon Macroeconomics.
In terms of quarterly figures, GDP grew by an estimated 0.2 percent in the second quarter, followed by a o.1 percent increase in the first quarter.
It was 0.4 up from the same quarter last year but remained 0.2 percent below the fourth quarter in 2019, leaving the UK to be the only Group of Seven country which GDP remains below pre-pandemic levels.
However, Chancellor of the Exchequer Jeremy Hunt said the Q2 figure has shown that the UK economy is resilient.
The service sector grew by 0.1 percent in the second quarter, ONS figures show.
This is largely driven by the information and communication sub-sector which saw big increases in areas such as film and TV production, computer programming, and consultancy.
Some businesses reported that good weather in June have helped hospitality services, which grew by 1.6 percent, the ONS said.
However, the increases were partially offset by declines in scientific research and development, architectural and engineering activities, advertising and market research, as well as financial, insurance, and real estate activities.
Production output has increased by 0.7 percent in the second quarter, following a 0.1 percent growth between January and March.
It’s mainly driven by manufacturing, which saw a 1.6 percent growth, in particular the manufacture of motor vehicles, trailers and semi-trailers, with a industry association reporting a 16.2 percent growth in June than the same month last year.
The ONS said the growth in manufacture may reflect the effect of falling cost for the sector.
According to research briefings published by the House of Commons, the service sector accounted for 79 percent of the UK’s economic output in the second quarter and 83 percent of employment in the first quarter, while manufacturing accounted for 9.4 percent of economic output in the second quarter and 8 percent of employment in the first quarter.
Construction grew by 0.3 percent in the second quarter, mainly driven by repair and maintenance. Government and household expenditures have grown by 3.1 percent and 0.7 percent respectively.
The ONS also said there was a 3.4 percent rise in business investment, which was offset by a 6.7 percent fall in government investment.
Most economists think tough times are ahead, despite the economy’s recent resilience.
“With much of the drag from higher interest rates still to come, we are sticking to our below-consensus forecast that the UK is heading for a mild recession later this year,” said economist Ruth Gregory from consultancy Capital Economics.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said the quarter’s GDP performance was “underwhelming,” saying it “highlights the worrying fragility in our economy as inflation, higher interest rates, and waning customer demand weigh on activity.”
