UK economy Speeds up to 0.7%, driven by Oil, Services

UK economy sped up to 0.7% in the second quarter, up from 0.4% a quarter before, and in line with expectations. Year-on-year growth came in at 2.6%, slightly less than estimated, the first GDP estimate published by the Office for National Statistics (ONS) showed on Tuesday.

UK economic growth in the second quarter accelerated in line with expectations, with an increase in services and mining and quarrying sectors being the main upward drivers.

Overall growth has been driven by the services sector and the strongest growth in mining and quarrying since 1989. However, manufacturing output has fallen slightly and construction sector has been flat.

Oil and gas production from the North Sea can be significantly volatile so the fact this sector was among the primary drivers in the second quarter suggests how fragile and unbalanced the UK economy remains.

Much of the GDP growth in the UK is still overly dependent on the domestic consumption, while even this segment of the economy is not that much of a sure shot given the most recent official figures showing retail sales slowed in the second quarter, compared to the previous one.

Expectations for domestic spending in Britain have been mixed recently, with some forecasters warning it could deteriorate even further once the Bank of England (BoE) begins to raise its base rate from the record low of 0.5%, given the burden of household debt and rising house prices.