The UK’s gross domestic product (GDP) grew by 0.7pc in the three months to the end of July, according to the National Institute of Economic and Social Research (NIESR), offering the latest evidence that the recovery is gaining strength.
The rate estimated by the respected forecaster represents an increase in pace from the 0.6pc recorded by officials for the second quarter of 2013, which itself doubled the 0.3pc growth seen in the first three months of the year.
“These estimates suggest a narrowing of the UK’s large negative output gap,” NIESR said, referring to the difference between its actual and potential growth.
“Consumer spending growth has underpinned the recent gains in economic momentum, in spite of the continued decline of real consumer wages.”
For the year as a whole, NIESR predicts growth of 1.2 pc, rising to 1.8pc cent in 2014. However, the think-tank does not expect the UK’s economic output to pass its early-2008 peak until 2015.
The positive growth estimate followed upbeat economic figures earlier on Tuesday.
British industrial output grew at the quickest pace in more than two years in June, official figures showed. Within that, manufacturing posted the first rise across all its sub-sectors since 1992.
Rob Wood, chief UK economist at Berenberg, said the only way to describe the data coming out of the UK was “wow”, but cautioned that Bank of England policy-makers must take care not to remove supportive measures too early.
“The bottom-line for the UK is that the stimulus is working and confidence is flowing back, driving a consumer led recovery and surge in house prices, that we expect to move onto a firmer footing next year as real wages finally start rising again and exports improve,” he said.
“But there is still a very long way to go. Output is, after all, still more than 3pc lower than in 2007. So the Bank of England’s job is to ensure the stimulus is not withdrawn prematurely and this recovery continues to blossom.”
