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UK sees robust economic growth but exports and investment slip : Survey

Tuesday, 8 July 2014 - 10:19am IST | Place: London | Agency: Reuters

Britain's economy kept growing at a robust rate in the second quarter, but exports and business investment weakened, clouding the prospects for a balanced recovery, a major business survey showed on Tuesday.

The British Chambers of Commerce's (BCC) quarterly survey of nearly 7,000 companies showed most of its key measures for manufacturing and services companies fell in the second quarter of 2014, albeit from strong levels at the start of the year. Manufacturers reported the biggest rise in domestic sales since the survey started in 1989, although growth cooled in the services companies that comprise the bulk of the economy.

The survey suggested the long-awaited rebalancing of Britain's economy, reviving the part played by manufacturing, might not be progressing as quickly as hoped. That may cause concern for Bank of England and government policymakers.

"The falls in all the export and investment balances act as a timely warning that although growth is stable, challenges facing our recovery still remain," said David Kern, chief economist at the BCC.

While the BCC still expects that the economy grew 0.8 percent in the second quarter, in line with economists polled by Reuters and unchanged from the first quarter, it added that the risks of a smaller expansion have increased.

"Unless investment and net exports make bigger contributions to growth, the recovery could stall," added Kern.

In May, the BoE forecast that growth would start to ease in the second half of the year. But last month BoE Governor Mark Carney said that there was little sign this was about to happen and that markets might have underestimated the chance of a rate rise this year.

The BCC's survey contrasts with last week's purchasing managers' indexes (PMIs). These showed manufacturing export orders quickened last month, while services companies that comprise the bulk of the economy took on staff at the fastest pace since at least 1996.

And business investment grew at the fastest rate in two years during the first three months of the year, according to official data, although the BCC survey suggested that might ease in the second quarter.

However, business surveys have painted a more unified view of inflation pressures. The PMIs last week showed price pressures cooled for both manufacturing and services companies, while the BCC survey showed intentions to raise prices waned.


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