British GDP growth picks up in the second quarter, boosted by services, production

British gross domestic product (GDP) was estimated to have increased by 0.7 percent in the second quarter of 2015 compared with growth of 0.4 percent in Q1 2015, announced the Office for National Statistics (ONS) Tuesday.

The growth pace is in line with the market expectation consensus. The British economy has recorded its 10th quarter of sustained economic growth so far.

OIL, GAS SURGE

ONS highlighted that the 0.7 percent increase in GDP growth in Q2 implies that GDP per head would be broadly equal to the pre-economic downturn peak in Q1 2008.

Official data showed that British services industry output increased by 0.7 percent quarterly in the first quarter, and production increased by 1.0 percent. Construction growth was flat. In contrast, agriculture decreased by 0.7 percent, data showed.

Among production sectors, however, British manufacturing output saw its first fall in two years with a decline of 0.3 percent in the quarter. Oil and gas production surge in North Sea lifted overall industrial output by one percent, the biggest increase since late 2010, figures showed.

The country's GDP was 2.6 percent higher in Q2 2015 compared with same quarter a year earlier, data also showed.

In the second quarter, Britain's GDP was estimated to have been 5.2 percent higher than the pre-economic downturn peak of Q1 2008, said ONS. From the peak in Q1 2008 to the trough in Q2 2009, British economy shrank by 6.0 percent.

George Osborne, British Chancellor of Exchequer, said via his twitter account that Britain is motoring ahead with economy producing as much per head as ever before, "we must stay on road we've set out on."

TWO-SPEED

Experts here stress that British economy recovery shows apparent imbalance, though its growth momentum remains intact.

Martin Beck, senior economic adviser to the EY ITEM Club, commented in a note that: "The sectoral breakdown emphasized the 'two-speed' nature of the expansion, with virtually all of the growth coming from the services sector."

"The success of the services sector is partly a reflection of the boost to consumer spending from 'noflation'. Manufacturers, in contrast, are being buffeted by the impact of the stronger pound, which is constraining export demand. The wildcard has been the performance of the mining & quarrying sector, where output rose by nearly eight percent in Q2. However, given the collapse in the oil price, it is unlikely that this will be sustained," said Beck.

The London-based economic forecaster maintains it forecast that Britain's GDP will grow by at least 2.7 percent in 2015, as low inflation and strengthening wage growth will continue to boost consumption and investment conditions remain favorable.

Vicky Redwood, Chief UK Economist at Capital Economics, also said in an analysis piece: "Growth remains very unbalanced. The services sector drove the rise in GDP, while construction output was flat and manufacturing output fell."

But at least it looks as though productivity growth is continuing to pick up, and on the face of it, the robust GDP figure could bring an interest rate rise a bit closer, said Redwood.