Solid second quarter for UK economy
BRITAIN’S economy roared into life in the second quarter of 2010, fuelled by stronger than expected industrial production data. Leading think-tank The National Institute of Economic and Social Research (Niesr) forecasts that the economy grew by 0.7 per cent in the three months to June.
It also revised up its estimate of GDP growth in the three months to May to 0.9 per cent from 0.6 per cent as a result of revisions to official industrial production data published yesterday.
Meanwhile, the Office for National Statistics yesterday said that industrial output rose 2.6 per cent in the three months to May, its fastest growth rate in more than 20 years. The narrower manufacturing activity measure rose by only 0.3 per cent on the month, following a revised fall of 0.8 per cent in April.
David Kern, chief economist at the British Chambers of Commerce, said: “May’s small increase in output confirms that the manufacturing recovery is on the right track. The new figures leave manufacturing firmly in positive territory when compared with a year ago.” Economists said this was consistent with robust expansion in economic activity in the second quarter. BNP Paribas’ Alan Clarke said: “It will require an absolute collapse in output in June to prevent industrial production from providing a substantial addition to GDP growth during the second quarter.”
But he warned that leading indicators have begun to fall, suggesting that the pace of expansion is unlikely to be maintained much beyond the middle of the year. “Hence although second quarter GDP growth is likely to be pretty good, that is about as good as it is going to get.”
The Niesr also forecasts slower growth ahead. “The UK economy does face headwinds. Fiscal consolidation both in the UK and the euro area will restrict growth in the short-term and there is clearly a risk that this rate of growth will not be maintained through the rest of this year,” it said.