UK Economic Recovery Accelerates Again

The UK economic recovery took another step forward in the second quarter as growth accelerated again, according to a leading estimate.

In its monthly GDP estimate, the National Institute for Economic and Social Research (NIESR) said output grew by 0.9% in the three months to the end of June.

Office for National Statistics (ONS) data shows 0.8% growth in the first quarter of the year, up from 0.7% in the final three months of 2013.

Official data from the production sector said output fell by 0.7% over the month in May, driven mostly by a 1.3% decline in manufacturing, raising concern about the wider economic recovery.

But the NIESR played down any fears.

"The month-on-month dip in the ONS's latest production estimates is expected to weigh only marginally on the economy's overall robust performance in 2014 Q2," said the thinktank.

"Based on our estimates, the UK economy is now 3.2% larger than in the same period last year."

For the whole of 2014, the NIESR predicts the UK economy to grow by 2.9%, making it the fastest growing developed economy in the world. In 2015 the forecast is for 2.4% growth.

A strengthening economic recovery has led the Bank of England to think about when it will raise interest rates.

The base rate has been at its all-time-low of 0.5% since 2009 as part of an ultra-loose monetary policy environment to keep the cost of credit cheap and banks lending to businesses and consumers.

This is to support the economic recovery by ensuring there is enough money around for people to spend and businesses to invest in expansion and hiring staff, supporting the economic recovery.

Mark Carney, the Bank of England governor, implied a base rate increase could come before the end of the 2014.

But he and other policymakers have repeatedly said any increase would be gradual to fend off the threat of an interest rates shock.