UK economy grew at fastest rate for nine years last quarter

Q2 GDP growth has actually been revised upwards, to 1.2%. Do the latest data suggest we can keep it up?

by James Taylor
Last Updated: 26 Oct 2010
The Office for National Statistics said today that the UK economy grew even faster than initially thought in the second quarter of this year: it's revised its GDP growth figure up from the (already surprising) 1.1% to 1.2%. That's the fastest growth rate for almost a decade. Given the slew of positive results from the City this week, and the continued surge in high street spending, we could almost be excused for feeling rather more cheerful about our economic prospects today. So thanks heavens we have the entirely impartial ray of sunshine Ed Balls to bring us back down to earth, by insisting that the Government's policies are dooming us all to certain double-dip...
The big factor behind the upward adjustment was the construction sector, which the ONS now reckons grew by a whopping 8.5%, well above its previous estimate of 6.6% - although admittedly it was starting from a pretty low base. Service industries were up 0.7% - and so too was retail spending, its biggest jump for a couple of years. The latest CBI Distributives Trade Survey actually paints a fairly positive picture of the high street: over half of the retailers surveyed reported a rise in sales during the first two weeks of August, citing the better weather (did we miss that?) and summer promotions. On balance, shopkeepers are a lot more positive about their prospects for the next three months now – although they also warned that prices were on the rise, which doesn’t bode well for inflation (and makes interest rate hikes more likely).
The news from the City has also been surprisingly good this week, with the likes of Diageo, William Hill and Savills all reporting higher profits. And there was more positive news today from property website Rightmove, which reported a 40% jump in first-half profits - though this seems to be less about a massive upturn in the housing market, and more about its customers shelling out more in a bid to shift their properties.
Still, you'll be surprised to hear that this hasn’t convinced everyone; notably Labour leadership contender Ed Balls, who warned today that the Coalition plan to slash the public sector while relying on the private sector to rise up and fill the gap was flawed, and would probably lead us back into recession, just like it did in the 1930s. He may have a point - but it would sound more credible if a) it wasn't so patently self-interested (rumour has it he's angling for the Shadow Chancellor job if/ when he loses) and b) it didn't come from someone who played such an instrumental role in running up our massive deficit (during an economic boom).
It's fairly safe to assume that we won't be enjoying quarterly GDP growth of 1.2% again any time soon. But on the evidence above, our economic situation looks slightly more positive than it did even a few weeks ago. As we head off for the Bank Holiday, let's be grateful for such small mercies.

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