UK growth accelerates to ‘0.4%’ in second quarter

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The UK economy will register improved growth of 0.4% in the second quarter of the year, according to a closely-watched forecast.

The prediction, by the authors of the Purchasing Managers’ Index (PMI) activity surveys, followed an official measurement of 0.2% growth for the first three months of the year.

The PMI estimate tallies with suggestions from economists that the slowdown during January to March was largely a blip.

Then, disruption from bad weather hitting construction and a post-Christmas spending hangover for consumers combined, damaging sentiment and resulting in a crisis for many retailers who were already battling strong cost headwinds.

Accumulated snow was proving a hazard across the UK on the weekend of March 3, after Storm Emma met the “Beast from the East” weather front to create large falls.
Image: Heavy snow and freezing temperatures inflicted damage on the high street during February and March though online sales held up

However, the IHS Markit/CIPS services PMI for June showed the fastest growth for the dominant sector since October last year – with the rate of new business jumping at its best pace for more than a year despite uncertainty over Brexit.

The surveys for construction and manufacturing earlier in the week had remained muted.

The pound climbed above $1.32 after the data was released on optimism it would bolster the case for a rise in interest rates.

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Video: Bank of England keeps interest rates on hold

The Bank of England voted in May to leave rates at 0.5% – citing the slowdown in growth – but support for a hike surged in June with a surprise 6-3 split in favour of no change.

Chris Williamson, chief business economist at IHS Markit, said: “Stronger growth of service sector activity adds to signs that the economy rebounded in the second quarter and opens the door for an August rate hike, especially when viewed alongside the news that inflationary pressures spiked higher.”

He added: “”It remains encouraging yet also surprising that current business activity continues to show such resilience amid relatively moribund confidence regarding the year ahead outlook.

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“The survey once again highlights how the business outlook remains clouded by widespread concerns about the impact of Brexit uncertainty in particular.

“Such a divergence between current and expected future activity stokes worries that the upturn is being fueled by short-term spending, based on hopes that uncertainty will lift, and likely masks a lack of longer-term business investment.”

From – SkyNews

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