Economy Figures Set To Show Second Quarter Of Growth Of GDP


Hopes that Britain's ailing economy is beginning to mount a sustained recovery should receive a boost this week with official figures set to show a second quarter of growth.

Gross domestic product (GDP) is widely expected to have increased by 0.6%, doubling the 0.3% rise in the first quarter, when the data is published by the Office for National Statistics (ONS) on Thursday.

The release of the figures will cap a period of marked brightening in the economic mood since the previous announcement in April, which many had feared might see the UK fall back into recession.

Mark Carney is taking over at the Bank of England

But instead it showed a 0.3% increase in GDP, and unofficial monthly data published since then has suggested a continued improvement, while revisions to ONS data revealed that the double-dip recession at the end of 2011 and beginning of 2012 never actually happened.

Yet the revisions turned out to be double-edged, confirming that the initial recession following the financial crisis was far worse than first feared, meaning the economy is now 3.9% below its pre-crisis peak - with the gap previously thought to be 2.6%.

Doubts also remain about the strength of the recovery, with fears over risks posed by the turbulent eurozone and the consumer-led nature of the economy's progress.

Officials at the International Monetary Fund (IMF) added to the ambivalence, raising their forecast for annual growth from 0.6% to 0.9%, but later issuing a gloomy analysis of the UK's prospects.

In a report last week, the IMF said the recovery remained "slow and fragile" with output expected to remain well below par for an extended period - with some of its economists suggesting the slow pace of growth could undermine the coalition's deficit-slashing policies.

Meanwhile, the Bank of England's first significant intervention under new governor Mark Carney saw policymakers apparently taking a less rosy view of the outlook than some in the City.

The decision to reassure markets that interest rates would remain low for some time to support the ailing economy - in the face of market predictions that they would go up sooner - was seen by some as a corrective to misplaced optimism.

In a rare note issued after this month's meeting of the Monetary Policy Committee, the Bank said: "There have been further signs that a recovery is in train, although it remains weak by historical standards and a degree of slack is expected to persist for some time."

There are also concerns over the shape of the recovery. The powerhouse services sector, representing three-quarters of the economy, is leading the way, while optimism is also increasing in a construction sector boosted by Government schemes to boost lending and home buying.

But manufacturing is yet to demonstrate any sustained progress, with latest official figures showing output fell 0.8% in June - though it looks to have picked up slightly over the whole quarter.

Tory grandee Lord Heseltine, who led a review for the Government aimed at boosting growth, said he detected an increase in business confidence.

He told Sky News' Murnaghan programme: "I don't think there's any doubt that the mood has changed."

Lord Heseltine added: "I think it's one of those things like an elephant, it is very difficult to define but you know it when you see it. I don't think you can allocate responsibility, something changes, people suddenly feel that there's an opportunity as opposed to a threat and the mood is pervasive.

"That I think is happening and, my word, not before time."

He added that the Government was making progress in rebalancing the economy despite "forces at work in Whitehall" which did not share George Osborne's enthusiasm.

"If you look at public sector jobs which have gone and the very much larger number of private sector jobs that have more than replaced them, you realise there is a rebalancing going on.

"I have a feeling that there's more to come. I know some of the fields I've been working in for the Government, the plans that we've put in place are unfolding - perhaps a bit slower than we wanted but they are still unfolding and there is more to come, so I take a rather more optimistic view about the prospect of rebalancing and one thing I know for sure is that the Chancellor personally feels very preoccupied to this.

"It is easily said, not all that easily done and there are forces at work in Whitehall that are not as keen as he is but there's no doubt at all in my mind that he has a strategic view about the need to rebalance."

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