Ben Brettell, Senior Economist, Hargreaves Lansdown:
Economists and commentators alike have been in pessimistic mode so far this year - the consensus being that inflation-squeezed consumers will cease to be the engine of UK economic growth.
Today’s GDP figures showed growth remains largely anaemic, accelerating slightly to 0.3% in the second quarter from 0.2% in Q1. This means year-on-year growth on 1.7%. Growth was driven by the dominant services sector, which grew 0.5%, while construction and manufacturing exerted downward pressure on the overall figure, shrinking by 0.9% and 0.5% respectively.
Yet despite lacklustre growth so far this year, there are tentative signs that things might improve in the second half.
Last week saw news that retail sales rose ahead of expectations, indicating the consumer may still have some petrol in the tank - though the Bank of England has expressed caution over rising levels of personal debt. Meanwhile inflation began to recede, which if it continues in the coming months could end the squeeze on real incomes.
Yesterday a CBI survey showed UK factories increasing output at the fastest rate since the mid-1990s, suggesting manufacturing - which makes up around ten percent of the economy - might make a meaningful contribution to overall economic growth in the third and fourth quarters.
As ever it’s worth noting that initial GDP estimates can usually be taken with a pinch of salt, as they are based on less than half of the data which will ultimately be available, and are therefore subject to revision in the coming months.