Growth Hopes for revival British economy showing signs of life
The proportion of UK services companies reporting rising exports rose to a record high in the second quarter, according to a closely watched survey by the British Chambers of Commerce.
The balance of exports for services rose to 36 per cent between April and June, the highest since the survey began in 1989. This figure is the difference between the percentage of companies with rising and falling exports.
Exports from the manufacturing sector also picked up, according to the survey, a finding reinforced by a separate survey showing a boost in new orders helped factory activity rise at the fastest pace for more than two years in June. The gauges for employment, business confidence, and profitability also rose in the second quarter of the year.
However, some continuing signs of frailty mean Dr Carney is unlikely to have completely escaped inheriting what he recently described as a "crisis economy".
"The improvement in most key balances in Q2, building on the upturn recorded in Q1, supports our view that the UK economy is slowly strengthening," British Chambers of Commerce chief economist David Kern said.
If progress could be sustained, there were "realistic hopes" the chambers' estimate that the economy would grow 0.6 per cent this year would be revised up, he said.
ING economist James Knightley said the British economy was on course for posting faster growth in the second quarter than it did in the first three months. He estimated GDP grew 0.4 per cent to 0.5 per cent in the second quarter, after expanding 0.3 per cent between January and March.
Key barometers of activity in the construction and services sector by financial data compilers Markit, are also expected to show improvement on their release this week.
However, economists warned that recent upward trends in the UK economy may not be sustainable against weakening activity in the US and China.
Despite the rise in many of the chambers' measures of business activity, most remained below pre-crisis levels. The survey also exposed worrying signals that businesses could lack the strength to drive a robust recovery. The proportion of services sector companies planning to grow investment in equipment fell in the second quarter, while cash flow remained weak in both sectors.
Mr Kern highlighted the turmoil in the global markets sparked by the US Federal Reserve's move to unwind quantitative easing, and ongoing troubles in the eurozone, as the main threats to recovery in the UK.
Commentators on the separate manufacturing data also were cautiously optimistic.
Frequently Asked Questions about this Article…
Surveys show several positive indicators: the British Chambers of Commerce reported a record rise in the balance of services exporters, manufacturing exports picked up, and a separate survey found factory activity rose at the fastest pace in more than two years in June. Employment, business confidence and profitability measures also improved in the second quarter, supporting views that UK growth may be strengthening.
The survey found the balance of services companies reporting rising exports rose to 36% between April and June — the highest level since the survey began in 1989. The 'balance' is the difference between the percentage of firms with rising exports and those with falling exports, indicating a strong improvement in services export performance.
Manufacturing exports showed signs of improvement, and a separate survey indicated a boost in new orders that helped factory activity expand at the fastest rate in over two years in June. Commentators were cautiously optimistic and key barometers from data compiler Markit were expected to show further improvement in construction and services activity.
ING economist James Knightley estimated that UK GDP grew about 0.4% to 0.5% in the second quarter, up from 0.3% in the first quarter. This suggests the economy was on course to post faster growth in Q2 compared with the opening three months of the year.
Yes. Economists cautioned that the recent upward trends might not hold if activity weakens in major trading partners such as the US and China. The article also highlights global risks like the US Federal Reserve's unwinding of quantitative easing and ongoing eurozone troubles as potential threats to the UK recovery.
Many survey measures remain below pre-crisis levels. The proportion of services firms planning to increase equipment investment fell in Q2, cash flow remained weak in both services and manufacturing sectors, and businesses may lack the strength to drive a robust recovery — all reasons for investor caution.
Possibly. The British Chambers of Commerce said if the improvement seen in Q1 and Q2 can be sustained, there are 'realistic hopes' their estimate of 0.6% growth for the year could be revised up. Any revision would depend on continued improvement in activity and global economic conditions.
Stay informed about key indicators mentioned in the article—services and manufacturing export trends, PMIs from Markit, corporate cash flow and investment plans, and central bank policy from the Bank of England and the US Federal Reserve. Maintain diversification, monitor company fundamentals for signs of improving profitability or persistent weakness, and consider the impact of global risks like slowing activity in the US, China and the eurozone before making major portfolio shifts.
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