UK growth unexpectedly revised down

LONDON – Britain’s economy expanded less quickly than previously thought in the second quarter as fresh data yesterday revealed government and services output had been significantly weaker than expected.

The Office for National Statistics said the economy grew by 0,7 per cent in the April-June period, down from an originally estimated 0,8 per cent, though it left the year-on-year rate unchanged at 2,6 per cent. Economists had expected no change to the original second quarter reading, which was the fastest quarterly growth rate in two years, and the surprise revision pushed the pound lower.”Slightly softer GDP growth argues for a fraction more spare capacity in the economy and a fall in the deflator could mean there is not much pressure on the Bank of England to raise interest rates,” said Daragh Maher, a strategist at Calyon.The ONS also revised down the GDP deflator – a key measure of inflation – to an annual rate of 2,2 per cent from an originally reported 3,4 per cent.It said the change had been caused by large upward revisions to both imports and exports as a result of a reassessment of the impact of VAT fraud and the correction of an error in the ONS system that measures this type of fraud.The ONS said the downward revision to Q2 growth was mainly due to new data on the health service, which showed hospital admissions over the quarter were lower than anticipated.A breakdown of the quarterly growth figures showed government and other services output expanded by just 0,4 per cent in April-June, half what was originally estimated.Nampa-ReutersEconomists had expected no change to the original second quarter reading, which was the fastest quarterly growth rate in two years, and the surprise revision pushed the pound lower.”Slightly softer GDP growth argues for a fraction more spare capacity in the economy and a fall in the deflator could mean there is not much pressure on the Bank of England to raise interest rates,” said Daragh Maher, a strategist at Calyon.The ONS also revised down the GDP deflator – a key measure of inflation – to an annual rate of 2,2 per cent from an originally reported 3,4 per cent.It said the change had been caused by large upward revisions to both imports and exports as a result of a reassessment of the impact of VAT fraud and the correction of an error in the ONS system that measures this type of fraud.The ONS said the downward revision to Q2 growth was mainly due to new data on the health service, which showed hospital admissions over the quarter were lower than anticipated.A breakdown of the quarterly growth figures showed government and other services output expanded by just 0,4 per cent in April-June, half what was originally estimated.Nampa-Reuters