UK recovery gains steam with 0.6 pct growth in Q2

LONDON (AP) ? The British economy grew by 0.6 percent in the first quarter compared with the previous three months, amid strong performances from nearly all the country's main industries.

The increase in annual gross domestic product, as reported by the Office for National Statistics Thursday, was double the previous quarter's rate but in line with market expectations. The UK's service, agriculture, manufacturing and construction industries all posted increases.

"Excluding last summer's boost from the Olympics, the rise was the strongest for almost two years," said Chris Williamson, the chief economist at Markit.com.

"Prospects look good for a continuation of the recovery in the third quarter, with consumers and businesses both helping drive the upturn."

Despite the increase, the UK economy is still smaller than it was before the 2008 economic crisis. Economic growth in this quarter is estimated to be 3.3 percent below the peak of the first three months of 2008.

Vicky Redwood of Capital Economics urged caution despite the uptick because real pay is still falling, bank lending is flat and government austerity measures are building.

"Of course, we shouldn't get too carried away," she wrote in a statement. "Even a 0.6 percent quarterly rise is fairly mediocre after such a deep recession."

Nonetheless, the increase in GDP will likely give the UK government a bit of breathing space amid criticism over its tough austerity policies. Critics say that despite the improvement in overall growth, many people in Britain are failing to see an improvement in their living standards.

The International Monetary Fund has suggested that the government might want to reconsider the pace of its austerity measures to help the economy, whose output was worth 1.4 trillion pounds ($2.1 trillion) in 2012.

Redwood added that as part of the move to get the UK's economy moving again, it was important for the Bank of England to reassure the markets that interest rates will stay low even as the recovery gains momentum.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2013-07-25-EU-Britain-Economy/id-0b384467a19a4ff4ac84a64833c47fa2

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