LONDON, July 26 (Xinhua) -- Economists found grounds for optimism that a recovery was underway in the British economy, with GDP figures for the second quarter of 2013 at 0.6 percent. However, there were still headwinds to navigate.
James Knightley, chief UK economist with ING Bank told Xinhua on Friday that the growth was in line with the expectations of the market and of his bank.
This was the best quarterly growth expansion since the third quarter of 2011, with the exception of the third quarter of 2012 when an increase of 0.7 percent was lifted by the London Olympics and the catch-up on activity lost in the second quarter of the same year to the extra public holiday for the Queen's Diamond Jubilee celebrations.
"Encouragingly, the third quarter is looking as though it is starting well. The June service sector PMI reported that new business was coming at the fastest rate since before the global financial crisis started in 2007, Knightley said.
Knightley said rising employment, increasing house prices and greater consumer confidence all pointed towards increased spending.
He was also optimistic because conditions had improved in the eurozone, which was Britain's largest single export market.
He said that all these factors would lead the Bank of England (BOE, the central bank) to take the view that "'forward guidance' is the policy option of choice, to ensure current monetary conditions remain in place, rather than more Quantitative Easing (QE)."
However, Britain's second quarter GDP figure in 2013 is still 3.3 percent below the peak in the first quarter of 2008, meaning that Britain has struggled for sustained growth since the global financial crisis.
Deutsche Bank chief UK economist George Buckley said Britain was still performing less well than most other Western economies.
"Only Italy among the G7 is further below its peak than Britain. The recovery since the middle of 2009 has been weaker than normal recoveries -- over the past four years since Britain emerged from the Great Recession of 2008-09 the average annualised pace of GDP growth has been just 1 percent, compared to a normal 'recovery rate' of more than 3 percent," he said.
Buckley said the figures did not make it any less likely that the BOE delivers on expectations for guidance alongside its Inflation Report on August 7.
"We have seen such a recovery before, back at the end of 2009 and into 2010, which of course ended up fizzling out before it had chance to gain any serious traction. Still, despite the weakness of the recovery we continue to believe that the BOE will provide only loose-form guidance," Buckley added.
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