The annual rate of UK economic growth has been revised upwards to 3.2% – its fastest pace since the end of 2007.The announcement was made by the Office for National Statistics (ONS) as it confirmed GDP growth of 0.8% in the second quarter of the year.
While that figure represented no change on its original estimate, the ONS said it had measured a stronger performance in the construction sector than previously calculated in its wider revisions.
It confirmed that the service sector – which makes up more than 75% of GDP – remained the main driver of Britain’s economy between April and June, expanding by 1%.
Much of this has been attributed to consumer spending despite huge pressure on budgets because of weak wage growth – a situation that had been tipped to ease during 2014 but has worsened again in recent months.
The ONS confirmed on Wednesday that wages shrank at an annual rate of 0.2% in the second quarter while the main measure of inflation rose to 1.9%, meaning the gap between wages and price rises was widening further.
The Bank of England has now made the weak pay issue a core factor in its discussions over the timing of an interest rate rise.
The UK’s resilient GDP growth is in sharp contrast to economic fortunes in the euro area.
It was confirmed on Thursday that Germany’s GDP was in decline and French growth was stagnating.
Chief UK economist at Citigroup, Michael Saunders, told Sky News he was not overly concerned that the woes being experienced by the country’s biggest trading partners would damage the UK’s recovery.
He said the suro had been “in economic terms, something of a zombie for a number of years now” and backed calls from France for the European Central Bank (ECB) to provide stimulus.
“The ECB will eventually get around to QE (quantitative easing) – five years too late – I think they’re going to do it in the next couple of quarters and that will give some boost but it really is a sad story of multiple policy failures in the euro area,” he said.
“Even if it gets a bit better I don’t think it will get a lot better in the euro area.”