The British economy picked up speed in the second quarter to its fastest annual rate in almost four years on the back of a strong recovery in the industrial sector, official figures showed on Friday. The Office for National Statistics said that GDP rose by 0.9 percent in the three months to June after a 0.7 percent gain in the previous quarter. This took the annual rate of expansion to 3.7 percent, the strongest since the third quarter of 2000. The figures were in line with consensus forecasts but will disappoint analysts who were looking for even stronger growth in light of a surge in retail sales in June. Still, growth is now running well above most estimates of trend and the data are likely to reinforce expectations that interest rates will rise by another quarter-point to 4.75 percent in August. The Bank of England has already raised borrowing costs by a total of a 100 basis points since November in a bid to cool roaring consumer demand and a booming housing market.
But policymakers may take some comfort from the more balanced composition of growth in the second quarter. The ONS said the acceleration in GDP growth was driven by a sharp recovery in the industrial sector. Total production rose by 0.9 percent in the three months to June -- the fastest rate in nearly five years --following a 0.5 percent contraction in the previous quarter. Output of the service sector also rose by 0.9 percent, the same rate as in the previous quarter, taking the annual rate of growth to 4.0 percent -- the strongest since the fourth quarter of 2000. Within this, the hotels, distribution and restaurants category showed growth of 1.0 percent on the quarter and of 5.0 percent on the year.///