Source: Financial Times
The UK’s scorching summer fuelled a recovery in retail and construction, propelling quarterly economic growth in the three months to July to its fastest pace in a year, official data showed on Monday.
The Office for National Statistics said its new measure of rolling three-month growth — comparing a three-month period with the previous three months — hit 0.6 per cent, up from 0.4 per cent in the previous quarter.
That was the strongest quarterly growth recorded since July 2017, although the figures were flattered by the unusually slow growth seen in February and March.
“It wasn’t just the mercury rising at the start of the third quarter: today’s data deluge suggests the UK economy was too,” said Lee Hopley, chief economist at the EEF manufacturers’ organisation.
The figures will vindicate policymakers at the Bank of England, who raised interest rates in August, saying they were now confident that the slowdown seen at the start of the year was due to a change in the weather, not the economic climate.
“Far from running out of steam UK activity has picked up after a very poor start to the year. Monthly data is choppy, but this pick-up shows that the UK is entering the crucial phase of the Brexit talks in better shape than seemed likely six months ago,” said Ian Stewart, chief economist at Deloitte.
George Buckley, economist at Nomura, said the figures were consistent with recent survey data and suggested the economy was performing well, given the BoE’s estimate that average annualised growth around 1.5 per cent is now the most the UK economy can sustain without fuelling inflation.
However, some economists question how durable the pick-up will prove.
It was in large part due to a sharp recovery in retail trade, which grew 2.1 per cent from the previous quarter. This could be a sign that consumers are starting to spend more freely, as the squeeze on real wages finally eases off, but separate data have shown that much of it was spending on food and drink — fuelled by the World Cup and other summer festivities — with large parts of the retail sector still afflicted by a secular shift in consumer habits.
Activity in the construction sector also grew strongly, up 3.3 per cent from the previous three-month period, although the fastest expansion came at the start of the period, when builders were still catching up with backlogs caused by the harsh winter.
Manufacturing remains the weak point in the economy, with rolling three-month growth negative for the fifth month in a row.