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UK economy said to have expanded 0.9% in the second quarter: NIESR

H.S. Borji
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The UK economy expanded at a steady rate in the three months through June, offering hope sustained growth will lead to a more balanced recovery throughout the year.

The UK economy accelerated 0.9 percent between April and June, the National Institute of Economic and Social Research reported today. That follows a gain of 0.7 percent in the three months through May.

The second quarter estimate suggests the UK economy has surpassed its pre-recession peak and is 3.2 percent higher than in the same period last year.

Excluding Italy, Britain is the last of the Group of Seven nation to regain its pre-recession level.

The UK economy accelerated 0.8 percent in the first quarter, according to official government data. The unemployment rate has fallen to 6.6 percent.

The Office for National Statistics will release new employment data next week.

The latest revision of first quarter data, released last month, suggests the UK recovery was more balanced than previously thought. Manufacturing and construction contributed nearly twice as much to GDP in the first quarter than previously forecast.

Manufacturing output increased 1.5 percent in the first quarter, while construction expanded more than twice as much as previously estimated (1.5 percent versus an earlier estimate of 0.6 percent).

Latest GDP figures also showed a significant revision in business investment, which advanced 5 percent in the first quarter compared to the previous estimate of 2.7 percent.

The UK service economy, which accounts for more than three-quarters of economic activity, advanced 0.8 percent, less than previously forecast.

Sustained economic growth in the UK has raised expectations the Bank of England could introduce a rate hike earlier than previously expected. The BOE is widely expected to become the first major central bank to introduce a rate hike, perhaps as early as the end of 2014.

The BOE, scheduled to meet Thursday to set monetary policy, will probably leave interest rates at 0.5 percent the asset purchase facility at £375 billion for the time being.

The Bank of England forecasts GDP growth at 3.4 percent annually in 2014 and 2.9 percent in 2015.

In economic data, British factory output unexpectedly declined in May, the ONS reported today.

Industrial production declined 0.7 percent in May, following a gain of 0.3 percent. Year-on-year, industrial production was up 2.3 percent.

Manufacturing production tumbled 1.3 percent, the biggest monthly drop since January 2013. Compared to May 2013, manufacturing production was up 3.7 percent.

In currency news, the British pound was little changed against the euro, as the EURGBP advanced 0.07 percent to 0.7950.

The GBPUSD was little changed at 1.7118 as the markets awaited US consumer credit data later on in the day.

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