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The Real GDP - Nigel Jump Blog
The first estimate of UK real GDP for the second quarter of
2010, surprised most people. The 1.1% increase quarter-on-quarter
(nearly 2% year-on-year) was well above market expectations. If
this acceleration from 0.3% was maintained, ironically, it would
mean that the lowering of UK growth forecasts by the OBR compared
with the March budget forecasts by HMT might prove premature.
There are some special factors at work, however, which suggest
the acceleration in the April-June months will be short-lived. The
1.1% increase is explained by four key elements.
First, business services and finance contributed 0.4%. It is
questionable, given the way the banks’ value added is measured and
the temporary bounce we have seen in housing and related
professional services, whether this will be repeated in the second
half of the year.
Second, construction also contributed 0.4%, which is very
unusual given its small share (6%) of total GDP. It probably says
more about the low level of activity in the weather-affected first
quarter than it does about the subsequent three months. Moreover,
some of the recent construction increase will have been public
sector led and, as we have seen with schools announcements
recently, that is unlikely to continue.
Third, government spending contributed 0.2%. We all know this is
going to shrink from now on.
Finally, production (manufacturing etc) contributed just 0.1%
and then rest (agriculture, utilities and other services) a net
nothing. Production is the bit that is supposed to rebalance the
economy for us. There is no sign of that in these figures.