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UK economic growth figures better than expected


The UK economy performed better than expected in the second quarter of 2014, as it expanded by 3.2% in comparison with the same period last year.

It was originally estimated that the economy would only grow by 3.1%, but figures released by the Office for National Statistics (ONS) confirmed that the UK economy had its best year since its 2008 peak.

Most sectors performed positively in comparison to last year too, including the construction sector which appeared to perform even better than expected as it grew by 4.8% year-on-year.

The services sector also performed particularly well, which is especially important as this sector accounts for 78% of the UK economy. In total, services grew by 3.6%, which is its best performance in six years.

Consumer spending driving UK economic growth

It would appear that the economic recovery is being driven by consumer spending, as the services sector has experienced “widespread” growth.

The ONS said that the four main sub sectors in the services industry all saw increases in their levels of growth. The four main sub sectors are:

- Business services and finance – 4.3% growth
- Distribution, hotels and restaurants – 4.8% growth
- Transport, storage and communication – 3.4% growth
- Government and other services – 1.9% growth

This means that the size of the services sector as a whole is now 3% larger than its peak in 2008, in comparison with the manufacturing sector which remains 7.5% below its pre-recession peak.

Chris Williamson an economist at Markit, claimed that economic growth is likely to be measured at 0.7% in the third quarter, which would suggest overall growth in 2014 should be around 3.5%.

Williamson also said the Bank of England is unlikely to increase interest rates in the near future as it could kill off the recovery. He continued to say that because interest rates are tied to growth, the first increases in interest rates would likely be in 2015.

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