Britain’s recovery quickened again in the second quarter after its slowdown in the first three months of the year. GDP rose by 0.7% between April and June, up from 0.4% in the first quarter. The uptick means projections for annual growth are now nearing last year’s total of 3%. Britain is also finally producing more per person than before the crisis – GDP per head is back to the 2008 peak.
What the commentators said
Our buoyant growth numbers aren’t as good as they look, reckoned Jeremy Warner in The Daily Telegraph. “The UK is far from the reformed, more balanced economy that policymakers hoped would rise phoenix-like from the ashes of the financial crisis.” The expansion in the second quarter was “unbalanced [and] consumption-dependent” – much like the sort of growth that got us into trouble in the first place. Most of the growth came from services; manufacturing declined.
Manufacturers’ order books grew at their slowest rate in two years this month, noted Philip Aldrick in The Times. They are under pressure from the stronger pound, while demand from the eurozone remains weak. In the absence of any support from external demand, reduced government spending simply “piles the pressure on households and companies to compensate by increasing their own spending and debts”, said Warner.
Still, while the recovery may be unbalanced, at least the prospects for consumption are encouraging. Consumer confidence is at multi-year highs and real wages are climbing. And with inflation set to stay low, interest rates won’t rise just yet. Nandini Ramakrishnan of JP Morgan Asset Management expects the first hike “closer to 2016 than to now”.