UK Q2 GDP Expands 0.4% On Household Spending, Investment

(RTTNews) - The UK economy expanded moderately in the second quarter as household consumption and gross fixed capital formation drove expansion amid escalated uncertainty from the war in the Middle East.

Real gross domestic product grew 0.4 percent from a quarter ago, following first quarter's 0.6 percent expansion, data from the Office for National Statistics showed Thursday. The pace of growth matched expectations.

On the production side of GDP, services growth weakened to 0.5 percent from 0.8 percent. Construction output climbed 0.3 percent.

At the same time, industrial production showed no growth after a 0.2 percent rise. Within production, there was an increase of 1.0 percent in manufacturing and a 0.2 percent gain in mining and quarrying. The expenditure-side breakdown showed that growth was driven by gross fixed capital formation and household consumption. Household spending rose 0.3 percent, while government spending dropped 0.3 percent.

Within gross capital formation, gross fixed capital formation climbed 1.2 percent. Business investment was up 1.7 percent.

Excluding the alignment adjustments, early estimates showed that chained volume inventories fell by GBP 1.38 billion in the second quarter.

Excluding non-monetary gold and other precious metals, the trade deficit was 1.0 percent of nominal GDP in the second quarter.

On a yearly basis, GDP advanced 1.2 percent in the second quarter compared to economists' forecast of 1.1 percent expansion.

Further, data showed that GDP posted a monthly growth of 0.3 percent in June after showing no growth in May.

Confederation of British Industry Senior Lead Economist Ben Jones said, "June's stronger-than-expected growth is encouraging, with the warm weather and start of the World Cup supporting consumer spending."

"Together with a solid performance across the second quarter, today's figures suggest the UK economy has so far proved more resilient to the economic fallout from the Iran war than was widely expected a few months ago," added Jones.

British Chambers of Commerce Research Manager Stuart Morrison said the UK economy showed welcome resilience in the second quarter despite global headwinds from the Iran conflict.

In a separate communiqué, the ONS said the visible trade deficit widened to GBP 23.01 billion in June from GBP 21.08 billion in May. The shortfall was seen at GBP 20.6 billion.

The services trade surplus dropped to GBP 17.5 billion from GBP 17.6 billion in May. As a result, total trade covering goods and services showed a shortfall of GBP 5.54 billion compared to a GBP 3.5 billion deficit in May.