Official figures released by the Office for National statistics (ONS) on Tuesday show that the UK’s economy rose by 0.7% in second quarter of this year, compared with growth of 0.4% in the first quarter of 2015.

The ONS Gross Domestic Product Preliminary Estimate for the second quarter 2105, from April to June revealed a change in gross domestic product (GDP), which is the main indicator of economic growth, also revealed that GDP was 2.6% higher in 2015 when compared with the same quarter in 2014. This acceleration in economic growth was largely attributed to a surge in oil and gas production in the UK, which was said to have been helped by tax changes to support the sector that were announced in March this year. The ‘mining and quarrying’ component of the industrial output data, which includes oil and gas extraction, increased by 7.8% in the quarter, the biggest rise since 1989.

According to the ONS seasonally adjusted figures, economic output was higher in two of the main industrial groupings within the economy during the second quarter this year, with services increasing by 0.7% and production increasing by 1.0%. However construction growth was shown to flat and agriculture decreased by 0.7%.

Wage rises and the temporary effects of consumer spending boosted by low inflation are expected to result in sustained strong domestic demand and the ONS report also indicated that businesses were finally increasing investment.

ONS chief economist Joe Grice was quoted as saying: “After a slowdown in the first quarter of 2015, overall GDP growth has returned to that typical of the previous two years.”

The BBC reported that Chancellor George Osborne said the figures showed that the UK was “motoring ahead”, adding that “Our economy is producing as much per person as ever before. But there are clear risks out there in the world economy from the eurozone to what’s happening in the world’s stock markets, and so its vital that we stay on the road that we’ve set out on.”

Head of economic analysis at the Confederation of British Industry (CBI), Anna Leach, also forecast that growth would remain “decent” through the rest of the year, helped by lower oil price and inflation, which she said would drive consumer spending and business activity. However, she warned: “Performance is mixed across sectors, with UK manufacturers going through a tough time as the stronger pound hits sales into the eurozone. Meanwhile, the eurozone is still grappling with uncertainty over the Greek bailout.”

Source: www.financial-news.co.uk

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