UK Economy Picks Up Some Speed, Brexit Hurdles Ahead

The ONS reported strong demand for clothing and footwear in June

The ONS reported that the warm weather and World Cup hype helped to drive economic growth between April and June as it prompted consumers to spend more.

Britain's economy bounced back in the second quarter after the Beast from the East cold snap nearly brought growth to a standstill. In annual terms, growth picked up only slightly to 1.3 percent in the second quarter after a almost six-year low of 1.2 percent at the start of the year.

World Cup revellers sent the cash tills ringing as manager Gareth Southgate's England team progressed to the semi-finals at the tournament held in Russian Federation.

Ruth Gregory, senior economist at Capital Economics, said growth would have been weaker had it not been for a big contribution from inventories, offsetting a "whopping" 0.8 percentage-point drag on growth from net trade, which was still down 0.5pp even excluding the volatile valuables component. Finance minister Philip Hammond said Brexit uncertainty was having a "depressing effect" on Britain's economy but he said growth would pick up to pre-referendum levels if the European Union accepted London's plan for their new relationship.

The report comes a week after the Bank of England raised interest rates for the second time since the financial crisis, saying recent data showed the economy had rebounded from the first quarter's "temporary" slowdown.

More news: Sterling slides below $1.29 as Brexit sell-off worsens

"However, manufacturing continued to fall back from its high point at the end of a year ago and underlying growth remained modest by historical standards. Growth of 0.9 percent in construction also contributed positively to GDP growth", the ONS said.

The increase in GDP was driven by strong growth in both the services and construction industries. Consumers have struggled to cope with weak wage growth for much of the past decade and a spike in inflation after the Brexit vote only added to the problem. Retailers in particular have struggled.

Services saw growth of 0.5% to make it the largest contributor during the quarter but there was a 0.8% contraction in production, which had a negative impact.

The ONS also revised down the pace of economic growth in the fourth quarter of 2017 to 0.4% from 0.5%, meaning year-on-year terms GDP growth was revised to 1.4%, the slowest pace seen for just over five years and the total GDP growth for the whole of 2017 was trimmed to 1.7%, the worst performance since 2012.

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