LONDON, July 25 - Britain's economy picked up by less than expected in the second quarter after inching ahead in the first three months of the year, official figures published on Friday showed. The Office for National Statistics said that gross domestic product rose by 0.3 percent between April and June and was up 1.8 percent on the year. This lagged analysts predictions of a 0.4 percent quarterly rise. In addition, many had said the figures could surprise on the upside after news of an unexpectedly big jump of 1.9 percent in retail sales in June on Thursday.
Slower than forecast growth will come as a blow to Chancellor of the Exchequer Gordon Brown who predicted growth for the year of between 2.0 percent and 2.5 percent in his April budget. Britain's economy grew by just 0.1 percent in the first quarter of the year and growth in the first half of this year is now weaker than the first six months of 2002. GDP grew by 1.9 percent in 2002. This will heighten expectations of another interest rate cut by the Bank of England in the coming months which had been dampened by the strong retail sales data on Thursday. In July, the BoE cut the cost of borrowing to a 48-year low of 3.5 percent on worries about the impact of slow global growth on Britain's economy.
The ONS provides little detail of the breakdown of growth at this preliminary stage, but it said output of the service industries grew 0.4 percent in the quarter and was up 2.6 percent in the year, the same as in the first quarter. Within that hotels, distribution and catering jumped by 1.2 percent in Q2, up 2.3 percent on the year. The ONS said it had estimated "moderate growth" in the transport, storage and communications component as well as in government and other services. It said little change is estimated in business services and finance, though the computing sector grew. The ONS estimated that manufacturing output was flat in the latest quarter following declines in most of the last two years. The output of the production industries is estimated to fall as a result of a decline in oil and gas and other mineral extraction. Energy supply output is estimated to have grown.//