The best export performance since 2011 gave a shot in the arm to Britain’s recovery hopes between April and June as the economy grew by a faster-than-expected 0.7%, official figures revealed today.
Exports jumped by an impressive 3.6% over the quarter, with net trade contributing almost half of the GDP growth, raising hopes that the long-awaited rebalancing of the economy could finally be taking place.
The Office for National Statistics revised its headline growth figure up from its original 0.6% estimate a month ago.
“The recovery seems to be becoming more balanced, which is just as well, given that the consumer-driven growth seen previously was largely based on households running down their savings,” said Vicky Redwood of Capital Economics.
Business investment, which has slumped by more than 20% since 2008, also showed signs of life, growing by 0.9%. Workers’ pay jumped by 2.4%, the highest quarterly increase since 2000, although the ONS said this was partly due to high earners delaying bonus payments from the first quarter to take advantage of the cut in the top income tax rate.
The Treasury hailed the figures as a further sign that the economy was picking up speed, following a host of positive surveys in recent months.
“It’s particularly encouraging that growth in exports and investment contributed well over half of the second-quarter growth rate,” a spokesperson said.
The upward revision was also driven by a better-than-expected performance from the construction sector, which rose 1.4%, up from the ONS’s first estimate of 0.9%.
The Bank of England this month pledged to hold interest rates at their record low of 0.5% until the unemployment rate falls to 7%, which the central bank estimates will not happen before 2016. But City analysts said that the latest positive GDP figures made it more likely the bank would raise rates sooner. “With inflation remaining sticky and the economy continuing to create jobs we continue to believe that the first Bank of England rate hike is more likely to come in early 2015,” said James Knightley of ING.
In a further possible hopeful sign for Britain’s exporters, German GDP figures today showed a healthy increase in domestic demand in the eurozone’s largest economy. Private consumption there rose by 0.5% over the second quarter.
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In the UK, household expenditure rose by 0.4% in the second quarter, contributing around a third of the quarter’s growth. Despite the Chancellor’s austerity drive, government spending was up 0.9%.
