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UK GDP revised up to 0.7% in Q2

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UK GDP has risen to 0.7 per cent in the second quarter of the year, which includes the immediate aftermath of the Brexit referendum, up from preliminary figures that suggested it had gone up 0.6 per cent.

A major contributor to growth was the service sector, which accounts for nearly four fifths of UK GDP. It rose by 0.4 per cent between June and July, while Office for National Statistics economists had expected a reading of 0.1 per cent.

Consumer spending also saw a boost in the second quarter of the year, as it was up 0.9 per cent quarter-on-quarter reflecting higher employment and decent purchasing power.

Investment was up 1.6 per cent quarter-on-quarter with business investment up 1 per cent for the same period.

ONS statistician Darren Morgan says: “Together this fresh data tends to support the view that there has been no sign of an immediate shock to the economy, although the full picture will continue to emerge.”

IHS Markit chief European and UK economist Howard Archer says despite the “resilience” of the UK economy post-Brexit vote, the months ahead could prove tougher.

He says: “We expect the economy will find growth increasingly difficult over the coming months, particularly in 2017, although it will most likely dodge recession. We expect the economy to suffer in 2017 as the uncertainties facing businesses and consumers are magnified by the triggering of Article 50.

“Additionally, the fundamentals for consumers will likely increasingly weaken as their purchasing power is diluted by rising inflation and muted earnings growth. Furthermore, the labour market looks likely to soften in 2017.”

Meanwhile, the current account deficit widened in the second quarter at £28.7bn. That equates to 5.9 percent of the country’s GDP, up from 5.7 percent in the first quarter. The deficit hit a record 7 percent at the end of last year.

Earlier this year, the Bank of England said the UK current account deficit is set to halve over the next two years amid trade balance improvement and the value of net investment income flows supported by a sharp fall in sterling.

The central bank projected that the current account deficit to narrow to around 5 per cent by early 2017 and to halve by 2018.

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