UK economic growth for second quarter revised down

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The UK economy grew by a weaker rate than earlier reported in the second quarter of the year, according to official figures.

The Office for National Statistics (ONS) said while it continued to measure quarter-on-quarter growth of 0.3% between April and June, the annual growth rate for gross domestic product (GDP) was 1.5%.

It had given an earlier estimate of 1.7% and said it represented the weakest performance since 2013.

Perhaps of greatest concern will be a decline in output in the country’s powerhouse service sector – responsible for the vast majority of UK growth since the financial crisis.

The ONS charted a 0.2% decline following growth of 0.3% in the previous month.

Wider data showed growth in the savings rate, with consumers apparently unwilling to spend on big ticket items amid Brexit uncertainty in the economy and rising prices.

Household spending power has been squeezed this year by the Brexit-linked collapse in the value of the pound which has raised import costs.

That price growth, measured as inflation, is currently outstripping wage growth and the Bank of England has signalled it is on track to overturn its interest rate cut of August 2016 in November in a bid to help curb inflation.

It has maintained its support in a bid to shore up the weakening economy this year and appears confident that the UK – with its high employment levels – can withstand a return to a Bank rate of 0.5% from 0.25%.

The pound – which returned earlier this month to levels against the dollar not seen since the immediate aftermath of the Brexit result above $1.36 – fell 0.5% in the wake of the ONS figures back below $1.34.

Much of sterling’s recent strengthening has been down to growing expectations of a UK rate rise though a stronger dollar has taken a toll on the recent recovery.

Chris Williamson, chief business economist at IHS Markit, said: “From a recent historical perspective, since the Bank of England’s independence, it would be unprecedented for the central bank to tighten policy with the data pointing to such anaemic economic growth.

“However, policymakers continue to fuel expectations that interest rates will rise soon in response to higher than expected inflation.”

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