The period April – June 2013 has seen positive economic growth for the second quarter. The economy expanded by 0.7%. Hopes of rebalancing the economy towards trade and investment were given a boost by an impressive 3.6% increase in exports in the same period.
However, the good news may too good for the Bank of England. It has pledged to hold the current low interest rates until unemployment drops below 7%. This is not expected to happen until 2016. The markets are now discounting a rise in interest rates as early as March 2015 on the basis that the economy is recovering faster than expected.
Business investment is also on the up, increasing by 0.9%; pay has increased by 2.6%, although this was distorted by delayed bonuses taken during April 2013; and household spending in the UK rose by 0.4%.
These statistics are by no means exceptional but they do point to a more encouraging outlook.
Economist warn that when the next election is past we will likely see Government returning to the reduction of Government expenditure; this will no doubt be a drag on any long term growth in UK trade and investment.
