Britain’s Recovery Picks Up

LONDON — Britain’s economic recovery still has a pulse — if a weak one.

The country’s recovery gained momentum in the second quarter as all of its main industries reported faster growth, government statistics showed Thursday. But some economists warned that it was too early to say the country’s malaise was over.

Gross domestic product grew 0.6 percent in the three months that ended in June from the first three months of this year, when the economy grew 0.3 percent, the Office for National Statistics said Thursday. Growth spanned the service sector, which accounts for about three-quarters of Britain’s economy, as well as construction, agricultural and production, which includes manufacturing. It was the first time in three years that all those industries grew at the same time.

“Growth not only accelerated appreciably but is also becoming more broadly based,” said Howard Archer, an economist at IHS Global Insight. But he also said that “significant economic headwinds persist,” meaning that the economy “will likely remain prone to periodic losses of momentum.”

The report on Britain’s slight uptick came a day after data from the long-suffering euro zone showed some sign of improvement. A survey of purchasing managers by the research firm Markit indicated that manufacturers in Germany and France had begun increasing production as demand grew, and there was evidence that a credit squeeze for consumers was easing. But there too, the recovery was likely to continue to be fragile despite the positive reports, some economists said.

In Britain, the service sector grew 0.6 percent in the second quarter; the construction business grew 0.9 percent; and the agriculture sector increased 1.1 percent. Production, including manufacturing, grew 0.6 percent, the Office for National Statistics said.

“Firms are feeling upbeat and are capable of expanding,” said John Longworth, director general of the British Chambers of Commerce. “More and more are adopting a ‘have a go’ attitude when it comes to exporting, which is really encouraging as this will go a long way to driving growth further still.”

BT Group, the telecommunications company, on Thursday reported fiscal first-quarter earnings that beat some analysts’ forecasts and said the outlook for its business was improving slightly. EasyJet, the low-cost airline, said Wednesday that its sales rose in the second quarter as it added capacity in Europe.

The economic revival in Britain is also accompanied by a rise in the price of residential property, according to the mortgage provider Halifax, a unit of Lloyds Banking Group. The value of homes rose 0.6 percent in June to the highest level in almost three years, helped by government measures that assist potential home buyers with making down payments.

But some economists said Britain’s recovery could start to lose momentum again in the second half of this year. Banks remain reluctant to offer loans, especially to smaller and medium-size companies; real wages have barely moved; and inflation continues to be above the Bank of England’s 2 percent target. A recovery is also closely linked to the strength of the economies of continental Europe, Britain’s largest export market, and Asia.

Economists and investors are waiting to hear from Mark J. Carney, who took over as governor of the Bank of England at the beginning of this month, about how he aims to strengthen the economic recovery. Mr. Carney is expected to lay out the central bank’s new policy on giving more guidance on the future levels of interest rates in early August, when the latest inflation report will be released.

Article source: http://www.nytimes.com/2013/07/26/business/global/britains-recovery-picks-up.html?partner=rss&emc=rss