British economic growth got back on track in the second quarter of 2015, after a pick-up in the country’s dominant services sector and one of the biggest surges in oil and gas production in a generation.
Gross domestic product grew 0.7 per cent on the quarter in the April-June period – in line with economists’ forecasts – after a first-quarter expansion of 0.4 per cent, the Office for National Statistics said yesterday in a preliminary estimate.
The ONS said economic output per head was now finally broadly level with the peak reached in the first quarter of 2008, before the financial crisis took a massive toll on Britain’s economy.
Second-quarter output was 2.6 per cent higher than a year earlier, also in line with forecasts.
“After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years,” ONS chief economist Joe Grice said.
Last year, Britain recorded its fastest growth in eight years, and earlier this month BOE Governor Mark Carney said the decision on when to raise interest rates from their record low would come into focus around the end of the year. Economists expect a minority of policy-makers to vote to raise interest rates as soon as next week’s BOE meeting, amid signs of strengthening wage growth and an economy operating at close to full capacity.
The preliminary reading of GDP is largely an estimate by Britain’s statisticians with more half of the data yet to be gathered, and the figures are often revised. The second-quarter data covered the run-up to a British national election which delivered a shock outright victory to Prime Minister David Cameron’s Conservative Party.
Monthly official data for April and May previously released had shown weakness in construction and manufacturing – where exporters are struggling with a strong pound – and yesterday’s figures showed the services sector driving growth.
Services output, which makes up more than three quarters of the economy, was up 0.7 per cent on the quarter after a 0.4 per cent rise in the first three months of 2015.
Domestic demand is expected to remain strong, with households bolstered by higher wages and temporarily low inflation, and signs that firms are stepping up investment as the recovery matures.
But demand from the eurozone has remained weak, weighing on manufacturers. On Monday a survey from the Confederation of British Industry pointed to the weakest outlook for exporters in nearly four years.
The ONS figures showed factory output dropped by 0.3 per cent, its first quarterly fall in over two years, but a surge in North Sea oil and gas production lifted overall industrial output by one per cent, the biggest increase since late 2010.
The ‘mining and quarrying’ component of industrial output, which includes oil and gas extraction, rose by 7.8 per cent on the quarter, the biggest increase since 1989.
The ONS said the rise, which came during a period of falling oil prices, was largely driven by tax cuts in March aimed at supporting the sector, which has dragged on British growth in recent years .
Construction was flat on the quarter, recovering from a slight fall the previous quarter, as official data continue to remain weaker than more robust private-sector surveys.