Shopping and filmmaking boost UK growth

Shopping and filmmaking boost UK growth

The UK economy grew 0.3 per cent from April to June compared with the previous three months, largely because of shopping, filmmaking and business services.
According to the preliminary estimate of second-quarter GDP published on Wednesday, the construction sector shrank 0.9 per cent while production — which includes manufacturing and utilities such as water and electricity — shrank by 0.4 per cent.
 
However, this was offset by growth of 0.5 per cent in the services sector, which makes up about 80 per cent of the UK economy.
 
"The economy has experienced a notable slowdown in the first half of this year,” said Darren Morgan, of the Office for National Statistics. Between January and March, growth was 0.2 per cent and, overall, the UK economy grew by 0.7 per cent in the first six months of 2017, the slowest rate since 2012.
 
“While services such as retail, and film production and distribution showed some improvement in the second quarter, a weaker performance from construction and manufacturing pulled down overall growth,” he said.
 
The largest contribution to services sector growth came from retailers. Recent ONS figures suggested that warm weather in June allowed consumers to cut back spending on utilities and buy more in the shops.
 
Film production made the second biggest contribution. This continues a trend of the industry supporting UK growth since the Brexit vote. Beauty and the Beast, Wonder Woman and Pirates of the Caribbean 5 were all partially made in Britain and were in cinemas during the second quarter.
 
The ONS said that UK film industry activity has grown by 72.4 per cent since the start of 2014 compared with growth of only 8.5 per cent across the EU. They said this may be due to tax breaks introduced for TV and film companies.
 
The data also found evidence of a slowdown in the car industry. A fall in motor vehicle manufacturing was the main reason manufacturing fell overall. The annual growth rate in the car sales industry has fallen from 14.4 per cent in the first quarter of 2014 to 0.6 per cent in the second quarter of 2017.
 
Overall growth was in line with the consensus among City forecasters and the Bank of England’s estimate at the time of the May Inflation Report.
 
The first estimate of growth contains only about 40 per cent of the information used to produce the final estimate and is often heavily revised. The Bank of England predict growth will be revised up to 0.4 per cent by the final estimate.
 
Paul Hollingsworth, UK economist at Capital Economics, said the BoE was unlikely to raise interest rates when it meets next Thursday.
 
“The economy gained a little bit of momentum in the second quarter, but growth is still too weak to prompt the [bank] to hike interest rates in the near future,” he said.
 
Inflation figures published last week reported an unexpected drop in annual price rises from 2.9 per cent in May to 2.6 per cent in June. This fall also reduces pressure on the bank to raise rates.
 
Philip Hammond, the chancellor, said he was “proud” of the UK’s growth and employment record but “not complacent”.
 
“We need to focus on restoring productivity growth to deliver higher wages and living standards for people across the country.”
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