UK economy grows even faster than previous estimate

UK economic growth in the second quarter has been revised up to 1.2% from a previous estimate of 1.1%.

The revision comes as a surprise to analysts after the original 1.1% estimate had already been more than twice the expansion expected.

Construction sector output was the biggest factor behind the rise, revised higher to 8.5%.  In the first Q2 GDP reading a month ago this had been estimated at 6.6% - a number which had caused incredulity in some quarters.

The growth means that GDP in the second quarter of 2010 was 1.7% higher than the second quarter of 2009, according to the Office for National Statistics.

The figures show that household expenditure rose 0.7% compared with a fall of 0.1% in the first quarter of the year.

Mark Littlewood, director general of the Institute of Economic Affairs, said the figures 'revealed the absurdity of arguing cuts will trigger a double dip recession'.

Littlewood added: 'Although the road to recovery will be a rocky one, the overall trend will be better the more strident the action the government takes on cutting public spending.'

The FTSE 100, falling after more economic fears pushed US markets lower, rose slightly on the news. Just before 10am the blue chip index was off 0.4% at 5135.  

But investors are now focused on a revision of US GDP for the second quarter due later today and a speech from Federal Reserve chairman Ben Bernanke. The growth figure is expected to show the world’s largest economy grew much less than previously estimated. ‘Recovery in both the housing and labour market has all but stalled and there is a good chance that a downward revision to GDP will spark further intervention from the Fed,’ said Duncan Higgins, senior analyst at Caxton FX.