Experian’s view that the UK economic upswing remains on track was supported by official data released today, which confirmed that the economy grew by 0.7% in real terms in the second quarter of this year.
Analysis of the figures showed that the service sector continues to expand at a healthy pace (led in the latest quarter by transport & storage, with growth of 1.4%) and that construction recovered from weakness in 2015 Q1. But manufacturing saw a marked contraction amidst a challenging global background for exports.
The figures also showed that real household disposable incomes rose by a robust 2% compared with 2015 Q1, and by 3.7% from the corresponding quarter a year ago. The household saving ratio rose from 4% in Q1 to 4.7% in the second quarter. The strong rise in real disposable incomes allowed consumers to increase spending by a solid 0.8% in the second quarter while increasing savings, illustrating the marked improvement in household finances in recent quarters. Low inflation, rising earnings and still high consumer confidence will continue to support household spending with growth expected to reach 3% this year and 2.3% in 2016. But manufacturing’s problems show that risks on the international front given weak global demand could constrain overall growth prospects in the next few quarters.