Business

UK economic growth revised up to 0.7%

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Media captionThis 'lift-off' moment at Felixstowe Port helps explain why figures are up, as Hugh Pym reports

Economic growth in the UK during the second quarter of the year has been revised up to 0.7% by the Office for National Statistics (ONS).

The initial estimate, released in July, suggested gross domestic product (GDP) - the UK's economic output - had risen by 0.6% from the previous quarter.

The ONS said the revision reflected small upward adjustments to the estimated output of several industries.

The data also showed that export demand played a major role in driving growth.

Compared with a year ago, GDP in the three months to June was 1.5% higher.

The latest revision adds to evidence that the UK economic recovery may finally be gaining momentum after almost four years of stagnation since the 2008-09 recession ended.

The 0.7% rate matches the pace recorded during the third quarter of 2012, when the economy was buoyed by the London Olympics, which was itself the fastest growth rate since 2010.

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Media captionThe BBC's Business Correspondent Ben Thompson: "This is a sign that the recovery is balanced"

However, the ONS cautioned that the current rate of economic growth was still well below the rate experienced during previous recoveries from recessions since 1945 - during which the economy has typically enjoyed a short burst of growth as it caught up with its pre-recession level.

The revised data confirmed that all four major sectors of the economy - services, industry, agriculture and construction - had expanded during the three months to June.

However, only the service sector has grown steadily since the 2008-09 recession ended, while the UK's manufacturing sector had previously continued to contract.

The latest index of service sector activity, also published by the ONS on Friday, showed output in the sector was 2.8% higher in June than a year earlier, led by financial services, and hotels and restaurants.

'Positive news'

The latest ONS release showed that exports played a bigger role than expected in boosting growth.

Exports rose 3.6% from the previous three months, helped by the weak pound and a bottoming-out of the eurozone economy, while imports increased 2.5%, meaning that the country's deficit would have narrowed.

"The expenditure breakdown was positive news," said Philip Rush, economist at investment bank Nomura. "Consumption obviously fairly important to the recovery there but... the recovery in the second quarter wasn't as reliant on consumption as we'd feared."

Most economists agree that for the recovery to be sustained, the UK economy needs to rebalance away from the consumer spending that helped drive the boom in the last decade, with greater reliance on industry, investment and exports.

Investment spending by businesses rose 0.9%, and government spending rose 0.9%, despite spending cuts in Whitehall.

"Barely months after the threat of a triple dip, a series of good economic results for the UK means business and consumer confidence is climbing," said Nancy Curtin of asset managers Close Brothers.

"A London-led recovery has spread to the regions. Like the US, the UK has shown its resilience in the face of slowing global trade."

On the currency markets, the pound jumped half a cent against the dollar on the news, to $1.563, as traders priced in expectations that the Bank of England was more likely to rein in its monetary stimulus in the coming months and years.

"These figures came as a little bit of a surprise and that is why we saw the break back above that $1.56 level," said Kathleen Brooks, research director at forex.com.

"Data out of the UK could help the market potentially challenge the Bank of England's pledge to keep rates low until 2016."

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