Monetary Policy Committee (MPC) member, Andrew Sentance, was set on raising the standard base rate from 0.5 per cent to 0.75 per cent in the August meeting. He was basing his decision on the data that inflation was still above target and the economy had shown unexpected growth in the second quarter of 1.1 per cent He will be set to ask for the vote again in September now that the 1.1 per cent growth has been upgraded to 1.2 per cent for the second quarter.
Today the Office for National Statistics revised their estimate to the 1.2 per cent value. This shows that Britain’s economic recovery was in progress more that expected which at 1.1 per cent was already a surprising rate to economists. However, those same economists are warning that growth will not continue to at that rate. They expect it to rise slowly, stall and eventually fall due to the weakening global economy. It will also be impacted by the governments major budget cuts that are due to come.
Richard Barwell, economist with RBS , said in regard to the new revision of economic growth: “We knew the construction numbers had been revised so this is not a massive surprise. The breakdown showed stronger growth in consumption than I was expecting, but weaker business investment. Still, I think the picture in two years time will be very different and the key thing is that no one expects this pace of growth to be sustained.”
The 1.2 per cent growth in increase is the highest in nine years.
Philip Shaw, economist with Investec, said: “Recent indicators suggest the third quarter got off to a good start, so although the pace of expansion in the quarter as a whole seems highly unlikely to match that in Q2, it is possible nonetheless that the UK notches up a very respectable pace of output.”