Consumer spending propelled the UK to another solid quarter of growth in the run-up to the Brexit referendum.
Household expenditure, which accounts for about 60 per cent of the UK’s economy, rose 0.9 per cent in the second quarter of the year — the biggest quarterly jump since 2014.
In year-on-year terms, household spending rose 3 per cent — the fastest pace since before the financial crisis.
Simon Wells, chief UK economist at HSBC, said the first half of the year had been “something of a sweet spot” for UK households, with inflation low and wages rising.
Ian Stewart, chief economist at Deloitte, said the data signalled the UK had entered the post-referendum period “with good momentum”.
Business investment, which had been widely expected to fall after two consecutive quarters of declines, rose 0.5 per cent on the quarter.
This was mainly due to an increase in transport equipment spending, with investment in other areas such as intellectual property or technology flat or falling.
Joe Grice, chief economist at the Office for National Statistics, said the official data showed “no sign so far of uncertainty having significantly affected investment or GDP”.
The overall pace of economic growth in the second quarter was confirmed as 0.6 per cent quarter on quarter, in line with City expectations and up from the 0.4 per cent pace recorded in the first quarter.
John Hawksworth, chief economist at PwC, said it seemed “as if the global economic uncertainties around the turn of the year may have had more of a dampening effect on UK investment than the uncertainty during the referendum campaign”.
Official data for how businesses have responded to the Brexit vote will not be available until the autumn, but early survey data have suggested companies are reining back investment intentions amid the uncertainty about Britain’s future trading relationship with Europe.
While the better than expected investment data in the run-up to the vote will raise hopes that companies are more prepared to invest in practice than they say in surveys, the overall picture is still weaker than a year ago.
Compared with the same quarter last year, business investment was down 0.8 per cent — matching a similar fall in the first quarter.
There was also disappointing news in terms of trade, which again dragged on growth.
Lee Hopley, chief economist at manufacturers’ organisation the EEF, said the quarterly growth rate was likely to be “the high point this year”, but that the fall in the value of sterling may help exporters, “counteracting some Brexit-related weakness in business investment”.
Most economists still expect the pace of growth to slow significantly in the third quarter as the impact of the vote to leave starts to show on official data.
Now-casting.com, which uses statistical modelling to determine the effect of individual data releases on the overall rate of growth, is currently predicting the economy will grow only 0.2 per cent in the third quarter of the year.
High street shopping data since the Brexit vote have shown consumers still firmly in spending mood. While the sharp drop in sterling since the vote is expected to result in higher prices, these have yet to feed through into the shops.
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