UK Recovery? Economy Grew Faster Than Thought in Second Quarter

Britain's economy grew faster than previously thought during the second quarter, adding to hopes that the country has finally started on the long path to recovery.

UK GDP grew by 0.7% on the quarter during the three months to June, according to a second estimate by the Office for National Statistics (ONS), an upward revision from the previous 0.6% reading.

"The upwards revision to GDP between the first and second estimate can be attributed to small upwards revisions across a number of the main industrial groupings," said the ONS.

Private industry in all three major sectors - services, manufacturing and construction - have reported a strident start to the third quarter.

Survey data from purchasing managers, compiled by researcher Markit, show service sector activity hitting a six-and-a-half year high during July. Manufacturers saw their biggest rise in output since February 2011 in July, while construction firms said sector activity improved to its best since June 2010.

Both the Bank of England and International Monetary Fund (IMF) have lifted their forecast for UK GDP growth in 2013. The BoE is predicting around 1% expansion, while the IMF estimates 0.9%.

Despite the improving domestic growth outlook, the stinging UK wages decline is continuing, as price inflation consistently outpaces the rate of pay rises each month. In the labour market, both long-term and youth unemployment are rising and temporary work is rife.

Global outlook

The IMF cut its global growth outlook in July for the fifth consecutive time, predicting 3.1% expansion in output, down from its previous projection of 3.3%.

"After years of strong growth, Brazil, Russia, India, China and South Africa are beginning to run into speed bumps," said Olivier Blanchard, the IMF's chief economist.

"While growth in emerging countries has slowed, inflation has not fallen with it. This has an important implication: that growth in emerging markets will remain high, but maybe substantially lower than it was before the crisis."

However, there are signs that the global economy may be picking up slightly from its slowdown.

China's manufacturing sector rebounded in August as output and new orders bounced in the world's second largest economy.

There was also good news from Europe, the UK's largest trading partner, after the eurozone currency area exited a lengthy recession in the second quarter.

According to the European Union's statistics office Eurostat, the 17-nation bloc's economy beat analysts' expectations and expanded by 0.3% in the three months to June.

Moreover, the Eurozone's private sector expanded at its fastest pace in more than two years in August as the purported recovery gathers pace.