The Gross Domestic Product (GDP) is the main indicator of economic growth. According to data released today by the Office for National Statistics (ONS), GDP was estimated to have increased by 0.6% in Q2 2016, compared with growth of 0.4% in Q1.
In comparison to the figures recorded in Q2 2015, GDP was 2.2% higher and it’s estimated to be 7.7% higher than at the peak of the economic downturn of Q1 2008.
One of the factors behind the rise is the strong performance from the manufacturing sector as services increased by 0.5% and production by 2.1%.
However, construction decreased by 0.4% while agriculture decreased by 1.0%.
This is a preliminary estimate of GDP as the data is less than half of the total required for a full and final figure so they are subject to revision, though ONS explained that revisions “are typically small”.
Ben Brettell, senior economist at Hargreaves Lansdown, said today’s figures show an absence of pre-Brexit concerns meaning that if the forecast downturn does materialise, at least the UK economy starts from a position of relative strength.
“To assess what might happen next, we need to look at so-called ‘leading indicators’, such as survey data. These universally make for pretty grim reading, and point to a likely slowdown and possible recession in the coming months.
“Consumer confidence fell at its fastest pace in 22 years in the aftermath of the vote. With confidence this low, a recession can become a self-fulfilling prophecy. Yet there are also tentative signs things might not turn out as bad as the doom-mongers predicted before the vote.”
Brettell added that a recent Bank of England survey found no clear evidence of a slowing in economic activity, while there has been a raft of good news from the corporate sector, such as GlaxoSmithKline announcing a £275m investment programme to expand its UK manufacturing operations.
“All eyes now turn to the Bank of England’s interest rate decision next week. Remarkably, swap markets are now pricing in a 99% chance of a cut to 0.25%, and even the Monetary Policy Committee’s arch-hawk Martin Weale has indicated his stance has shifted towards backing a cut.”