UK economy grew 0.6% over second quarter, ONS confirms

The UK economy grew 0.6% during a second quarter that concluded with the 23 June vote to leave the European Union, aided by the biggest uptick in industrial production since 1999, according to official data.

Reconfirming the preliminary data released on 27 July, the Office for National Statistics said on Friday (26 August), that second quarter gross domestic product (GDP) rose from 0.4% in the first three months of the year.

GDP was also up 2.2% on an annualised basis, in line with a Reuters' analyst poll. Much of the growth was driven the country's dominant services sector that grew 0.5% and the manufacturing sector which grew 1.8%, boosted by automobile and pharmaceuticals sector.

Households also did not hold back, as consumer spending rose by 0.9% in the three months to June compared with the prior three months; the highest increase since the third quarter of 2014. On an annualised basis the rise equated to 3.0%, the highest since the first quarter of 2007.

Contrary to market expectations investment by businesses actually rose 0.5% in the three months to June, compared with the previous three months.

Joe Grice, ONS' chief economist, said: "Today's figures reinforce the picture that the economy grew strongly in April, and then remained relatively flat in May and June.

"Business Investment grew in the second quarter, partly thanks to companies spending on transport equipment such as cars and planes. However, levels of investment remained lower than at the same period last year."

Grice also said ONS survey returns, which include the period leading up to and immediately following the referendum, show no sign so far of uncertainty having "significantly affected investment or GDP."

Howard Archer, chief UK economist at IHS Markit, said the economic performance, while encouraging, was unlikely to be sustained as post-Brexit scenarios become clearer.

"It is likely to be some considerable time before the economy again expands anything like 0.6% quarter-on-quarter. We suspect the Brexit-vote will significantly weigh down on British economic activity for a prolonged period, primarily due to prolonged uncertainty over the outlook affecting business investment and employment."

Archer also noted that consumer fundamentals will progressively decline due to an increasing squeeze on purchasing power from rising inflation, limited earnings growth and a nominal increase in unemployment. "On the positive side, the sharply weakened pound should boost exports," he concluded.

Updated with additional data and analysts quotes at 10:08am BST on 26 August, 2016.