The UK economy expanded faster than previously estimated in the second quarter in the biggest growth spurt since 2001 as companies rebuilt stocks and construction work surged.
Gross domestic product rose 1.2 per cent from the previous three months, the Office for National Statistics said today in London. That was higher than the 1.1 per cent initial estimate, which was the median forecast of 25 economists in a Bloomberg News survey. On the year, the economy expanded 1.7 per cent.
The UK GDP figure was revised up after construction expanded faster than previously estimated, rising 8.5 per cent on the quarter, the most since 1982. Inventories rose by £983 million in the first evidence of stock- building by companies for seven quarters, the statistics office's report showed.
Britain's growth pickup may deepen the divide among policy makers as the Bank of England considers whether the economy faces a greater threat from inflation or needs more stimulus to avert a further recession. The nation faces the biggest budget squeeze since World War II while a debt crisis threatens the recovery in the euro region, its largest trading partner.
The pound fell more than 0.2 per cent against the dollar after the report, which showed slower services growth than previously estimated and a drop in fixed investment. The currency traded at $1.5508 as of 9.34am in London. The yield on the benchmark two-year government bond was down 2 basis points today at
0.618 per cent.
Consumer spending rose 0.7 per cent and government expenditure increased by 0.3 per cent, the statistics office said. That offset a 2.4 per cent drop in fixed investment.
Services growth was revised down to 0.7 per cent from 0.9 per cent, the statistics office said. Faster expansion in business services was outweighed by a drop in air transport during a quarter when European airspace was disrupted by an ash cloud caused by volcanic activity in Iceland.
The Office for Budget Responsibility, the government's new fiscal monitor, said last month that Chancellor of the Exchequer George Osborne's spending cuts have increased the chance the UK may plunge back into recession. The measures will slice £85 billion from expenditure, equivalent to 5.7 per cent of GDP, according to Institute for Fiscal Studies estimates.
Bloomberg