Boost for recovery hopes as UK enjoys a growth spurt

The Office for National Statistics (ONS) revised growth in the second quarter to 0.7 per cent, up from its initial estimate of 0.6 per cent expansion.

Rosier growth was seen across all sectors of the economy, with small upward revisions across manufacturing, construction and parts of services.

Second-quarter growth more than doubled from 0.3 per cent expansion in the first three months, raising hopes that the economy is now powering out of its five-year slump.

The Treasury said the upward revision confirmed the UK is “moving from rescue to recovery”.

A spokeswoman said: “There is still a long way to go, but the economy is on the right track and the Government is committed to its economic plan that has already cut the deficit by a third and enabled the private sector to create over 1.3 million new jobs.”

Output from the UK’s building sites expanded by 1.4 per cent in the second quarter from an initial 0.9 per cent estimate as the housing market was ignited by state stimulus schemes, including Help to Buy and Funding for Lending.

There were also brighter signs from factories, which grew output by 0.7 per cent during the quarter, up from an initial 0.4 per cent estimate.

And output from distribution, hotels and catering firms was revised up to 1.7 per cent from 1.5 per cent, while growth across business services and finance firms was also revised higher to 0.6 per cent from 0.5 per cent.

The overall services sector expanded by an unchanged 0.6 per cent, but output from the agriculture sector was revised up to 1.7 per cent from the 1.1 per cent first estimate.

Britain’s shrinking net trade deficit, which dropped to £3.2bn in the second quarter from a £4.3bn deficit in the first quarter, also contributed to the increase in output as exports leapt to a record level.

James Knightley, economist at ING Bank, said the higher estimate of gross domestic product (GDP) will “boost optimism on the economy”.

Markit chief economist Chris Williamson added it was a “very encouraging picture of a broad-based upturn across almost all sectors of the economy”.

Pay and pension contributions increased by 2.4 per cent in the second quarter – the highest quarterly increase since late 2000 – with the pay spike boosted by unusually high bonus payments in April.

The ONS said spending across various parts of the economy contributed to growing output.

Spending by households increased 0.4 per cent in the quarter, raising hopes that higher consumer spending will drive the recovery. It is now 1.6 per cent higher than a year earlier.

The ONS said overall economic output is now 3.2 per cent below its peak in the first quarter of 2008.