UK economy continues steady growth


Britain's gross domestic product (GDP) rose by 0.7 per cent in the second quarter of 2006, maintaining the steady increase in productivity which has continued since 2003.

Government figures published today by the Office of National Statistics (ONS) show that the service sector was largely responsible for maintaining the GDP growth.

Chained volume measures governing the ONS' output index showed total productivity up but exceeded by the services sector, with manufacturing continuing to fluctuate at significantly lower levels.

Meanwhile GDP continued its upward quarterly trend, holding growth steady for the last three quarters in what appears to be a placid and stable economy. Manufacturing, which at present relies heavily on the international market, saw a second consecutive quarter of positive growth for the first time in two years.

Despite the annual growth rate being unchanged at 2.6 per cent, experts believe that the Bank of England is likely to respond to the current climate by raising interest rates before the end of this year.

"With growth seemingly holding up well at the moment, consumer price inflation above-target and rising, and the housing market buoyant - and given its concerns that wage settlements could rise during the next pay round - the Bank of England still seems very likely to deliver another precautionary 25 basis point interest rate hike in November," Howard Archer of research firm Global Insight commented.

"However, we believe that growth is likely to lose some momentum over the coming months as consumers continue to face significant headwinds and exports are limited by a slowdown in global growth," he said, predicting continued stability in growth rates in 2007.

In a separate release issued today the ONS revealed that the UK's balance of trade deficit had decreased for the fourth consecutive quarter in the second quarter of this year, down to 2.2 per cent of the nation's GDP.

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