U.K. Economy Seen Expanding Most Since 2012 as Services Gain
U.K. economic growth probably accelerated in the second quarter to the fastest pace since 2012 as newly confident Britons took to the shops.
Gross domestic product increased 0.6 percent from the first quarter, when it rose 0.3 percent, according to the median of 37 forecasts in a Bloomberg News survey. The Office for National Statistics will publish the data, a first estimate, at 9:30 a.m. in London on July 25.
Growth is forecast by economists to be led by services, the largest part of the economy, with recent reports suggesting rising house prices and falling unemployment are spurring consumer confidence. In a shift of policy, Bank of England officials are looking to forward guidance to maintain stimulus while the recovery gains traction.
“It looks like consumer spending has held up and we should see a decent pickup in services,” said Ross Walker, an economist in London at Royal Bank of Scotland Group Plc. “The risk of another negative quarter has receded but we’re not going to see a blistering pace of expansion. The recovery looks weak by historical standards.”
The economy probably expanded 1.4 percent from a year earlier, according to 30 economists in a separate survey.
Retail sales including fuel rose 0.2 percent from May, when they gained 2.1 percent in the first consecutive monthly increase since July 2012, the ONS said yesterday. Acadametrics Ltd. reported last week that house prices rose to a record in June.
Consumer sentiment rose to a two-year high last month, according to a GfK NOP Ltd. index. At the same time, claims for unemployment benefits fell the most in three years, dropping 21,200 from May to 1.48 million, data from the ONS showed.
The return to growth in the first quarter was partly due to consumers saving less of their incomes, with the savings ratio falling to 4.2 percent, the lowest in four years. Some economists have questioned the durability of a consumer-led rebound when unemployment is close to 8 percent and inflation continues to outstrip growth in wages.
With the U.K. government sticking to plans for the biggest fiscal squeeze since World War II and risks of renewed turmoil in Europe, Britain’s biggest trade partner, Bank of England officials sought this month to shield the recovery from the prospect of a scaling back of monetary stimulus in the U.S.
At Mark Carney’s first decision as governor, all nine members of the Monetary Policy Committee voted to leave their bond-purchase program at 375 billion pounds ($572 billion) and the key rate at a record-low 0.5 percent. Paul Fisher and David Miles dropped a call from previous months for more gilt purchases in favor of a “mixed strategy” involving guidance on the path of interest rates, minutes of the July 3-4 decision published this week show.
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