UK sees fastest growth in nine years
Published 28/09/2010 | 10:56
Britain's economy grew at the fastest pace in nine years in the second quarter of the year, official figures confirmed today.
The Office for National Statistics (ONS) held its estimate for growth of gross domestic product (GDP) between April and June at 1.2pc, a pace not seen since 2001.
The advance - originally estimated at an already surprisingly high 1.1pc - was upgraded last month following better-than-expected and record-breaking figures in the construction sector.
The upward revision in GDP growth last month was driven by a record-breaking performance in construction sector output, which was revised upwards again today to 9.5pc from 8.5pc, its strongest rate since the second quarter of 1963.
But economists warned that growth in the second quarter represents a peak in the rate of recovery and any further gains in the face of the UK coalition Government's deficit-busting spending review next month are unlikely.
Jonathan Loynes, chief European economist at Capital Economics, said: "With income set to come under further pressure over the coming quarters as the fiscal squeeze bites, there are clear doubts over whether households can carry on spending like they did in Q2.
"Overall, there are still very good reasons to be cautious over the sustainability of the economic recovery."
Today's figures revealed household disposable income fell by 1.6pc in the latest quarter, following a rise of 0.5pc in the first quarter.
The ONS said an unrevised rise in household spending was offset by a drop in savings. The household savings ratio dropped from 5.5pc to 3.2pc - its lowest level in six quarters.
Yesterday, Charles Bean, deputy governor at the Bank of England, urged the country to spend more, rather than save.
Howard Archer, chief UK and European economist at IHS Global Insight, said the unrevised GDP growth did not alter the outlook for monetary policy.
The Bank of England is holding interest rates at an all-time low of 0.5pc, and has pumped £200bn into the economy through its quantitative easing programme.
Mr Archer said: "The Bank of England seems highly likely to keep interest rates down at 0.5pc for many months to come despite persistent above-target consumer price inflation."
But looking ahead, Mr Archer said the latest data pointed to a marked slowdown in growth in the third quarter.
He went on: "With recovery likely to remain muted, the Bank of England is seen keeping interest rates down at 0.5pc until at least the fourth quarter of 2011.
"Furthermore, the Bank of England could very well revive quantitative easing, particularly if credit conditions remain tight."
Today's figures follow a report from the International Monetary Fund (IMF) that concluded the UK economy is on the mend and "recovery is under way".
The IMF said unemployment in Britain had "stabilised" and financial sector health had improved, and forecast economic growth of 2pc in 2011, although this was lower than its previous estimate of 2.1pc.