- Samuel Tombs, analyst at Capital Economics
British economic growth accelerated in the second quarter, fuelling speculation about the first rate hike in interest rates since the financial crisis. The UK economy grew by 0.7% in the April-June period, according to the Office for National Statistics' preliminary estimate, compared with the 0.4% expansion in the beginning of the year. Measured on an annual basis, economic output rose by 2.6% in the second quarter. The economy's pickup was driven by the services sector, which disappointed in the first quarter, but now looks set to benefit from low inflation and higher earnings. The industrial sector also enjoyed a solid recovery, as the extraction industry in the North Sea recovered after months of low oil prices. Mining and quarrying activity rose at the fastest pace in more than 25 years, supported by tax cuts for oil and gas producers introduced in March. The first estimate of GDP is based on about 40% of the available economic data and is subject to revision. The second estimate is due in about a month's time.
The BoE's Monetary Policy Committee will share its view on rates on 6 August, with expectations increasing that there could be a split among its nine board members. Economists say a number of factors are weighing against a rise in rates, including zero inflation which is below the 2% goal that the Bank of England has been set.
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