From the Greek crisis and the chance of a Greek exit from the Eurozone to the ongoing Chinese stock market devaluation, the potential for a slump in the UK’s economic growth was a very issue for the markets. Countless think pieces had been published, analysts thoughts collated and markets braced, and all eyes were on the Office for National Statistics. Now, they’ve announced that growth for the UK was recorded at 0.7% for the three months to June, further confirming the sure footing that the UK is currently on. The growth in the UK economy has a knock on effect to our own business where sales of stainless steel hydraulic fittings continues apace
Economists have warned that the boost to trade might be temporary, because the persistent strength of sterling is making British goods increasingly expensive abroad. Indeed, what’s going on with the Chinese stock markets may yet hit the UK markets amid growing uncertainty as to China’s long term plan with their market.
Still, the news will come as positive news to the government and chancellor, who were put on notice by the 0.4% growth that was recorded in the first quarter. That 0.4% growth was the sharpest drop off in growth in two years, and sparked worries amongst businesses that the UK might be levelling off at a time when it should be pushing on and growing amid relatively favourable global conditions. Analysts were confident at the time though, stating “The economic fundamentals look broadly positive for the UK, particularly for the consumer, and we believe growth will be largely healthy through the second half of 2015, Consumers’ purchasing power should see marked improvement due to extremely low consumer price inflation and strengthening earnings growth, while employment should see decent growth. Furthermore, it currently looks unlikely that interest rates will rise before 2016”
Driving the Q2 growth was business investment, which rose 2.9% when compared to Q1 and was the highest figure in 12 months. Samuel Tombs, senior UK economist at Capital Economics, said the figure "put paid to the idea that uncertainty about the general election would weigh on capital expenditure". It was complimented by a household spending increase of 0.7%, down from the 0.9% recorded in the first quarter but this is likely offset by the lack of large sale season like we see in the opening months of the year. "With growth in households' real incomes set to remain supported by low inflation, building wage growth and strong job creation, we continue to think that the economic recovery will sustain its current pace in the second half of 2015," continued Mr Tombs.
The Office for National Statistics state that output was increased in both services and production, reporting 0.7% and 1% respectively, though construction was flat and agriculture decreased by 0.7%. It’s a mixed bag for the nation, but for companies like Custom Fittings then the growth in production is great news, indicating a manufacturing base that is not only holding ground, but taking it too. In more general terms, GDP was 2.6% higher in Q2 than it was during the same period last year, and Q2 2015 found GDP 5.2% higher than the pre-economic downturn peak of Q1 2008. It’s worth remembering that from Q1 2008 to Q2 of that same year, the economy contracted by 6.0%.
In related news, the CBI have said the UK is to enjoy “decent quarterly GDP growth” as it predicts growth of 2.6% this year and 2.8% for 2016, up from their June forecast of 2.4% and 2.5% respectively. The CBI expects interest rates to rise in the first quarter of next year, likely to 0.75% in the first quarter of 2015.