UK GDP grew 0.7 percent in second quarter

The UK economy bounced back in the second quarter, driven by rebounding services activity and industrial output, according to the Office for National Statistics.

The ONS said on Tuesday that UK GDP grew 0.7 percent between April and June, up from 0.4 percent growth reported for the first quarter of the year.

A significant portion of growth came from the services sector, which expanded 0.7 percent, contributing 0.5 percentage points to the total.

ONS chief economist Joe Grice said:

“After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years.

“But the pattern has differed across the economy. Overall growth has been driven by the service sector and the strongest growth in mining and quarrying since 1989.

“However, manufacturing output has fallen slightly and construction has been flat.”

Now that growth is back on track it is more likely that the Bank of England will move forward with increasing interest rates sooner than previously expected.

With interest rates at only 0.50 percent it will soon become necessary for the central bank to hike rates, especially considering that wages are now rising strongly.

Earlier this month BoE governor Mark Carney said:

“It would not seem unreasonable to me to expect that, once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historic averages.

“In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.”

GDP is currently 5.2 percent higher than its level in the first quarter of 2008 – around the time when the UK economy shrunk by almost six percent.