The UK economy is expected to rebound in the third quarter, after official figures showed today that GDP contracted by less than previously thought in the second quarter.
In its third estimate of GDP for the period, the Office for National Statistics (ONS) said that the economy contracted by 0.4% in the three months to June. The contraction was initially estimated at 0.7% and was revised to 0.5% last month.
Economists believe that the third quarter will show a strong rebound, as business surveys and recent data such as retail sales and industrial production have pointed to a return to growth.
In addition, factors that impacted on economic performance in the second quarter, like the extra Diamond Jubilee bank holiday and the wet weather in June, are absent from the third quarter and there is also the possibility of an additional boost from the London Olympic Games.
A less severe contraction in construction and industrial production was behind the latest revision to the GDP estimate, in addition to which the figures for household spending and business investment were raised.
EEF, the manufacturers’ organisation, said that the figures offer some hope for manufacturing and noted that manufacturing investment increased by 5.9% in the second quarter. There should be a return to growth for the sector in the second half of the year, despite the tough economic conditions, the organisation believes.
A new report released today by the Society of Motor Manufacturers and Traders (SMMT) also offers a positive outlook, suggesting that the UK is becoming an increasingly attractive market and is now a “destination of choice” for global vehicle manufacturers.
“With unprecedented levels of investment committed to UK automotive in recent years, the future for our industry is bright,” commented SMMT chief executive Paul Everitt.
UK automotive manufacturing is forecast to grow by 9% per year, with production reaching 2.2 million vehicles in 2016.