The UK economic recovery remains driven by the services sector, according to revised figures released Friday, and the second half of 2014 is unlikely to see a rebalancing towards exports and manufacturing.
The first revision of the official Q2 figures saw GDP growth unchanged from the first release at 0.8 percent quarter on quarter, but the 12-month GDP growth was revised up 0.1 percentage point to 3.2 percent.
This is well above the long term trend of 2.6 percent, and bodes well for the recovery, which began at the start of 2013, continuing strongly into the second half of this year.
The British GDP is now confirmed at just a little larger than its pre-crisis peak in the first quarter of 2008, after which point it had contracted 7.2 percent.
But the driving force of the recovery remains a potential problem for Britain, as the new details in the figures released Friday reveal.
The large services sector, about 77 percent of the economy, grew by 1 percent quarter on quarter, which was an increase on that sector’s growth in Q1 when it grew by 0.8 percent.
Within services, business services and finance made the largest contribution, but the other main sub-sectors also expanded, indicating the robustness of the recovery.
Services sector output is now well ahead of its pre-crisis peak (+3 percent), but is in the other smaller sectors that growth was subdued in the second quarter, and those sectors are still smaller than they were six years ago.
The production sector continued its weak expansion at 0.3 percent quarter on quarter growth, revised down 1 percentage point. The construction sector was upwardly revised to 0 percent growth.
The rebalancing of the economy from service sector dominance to export-led sustainable growth from the manufacturing sub-sector is not taking place.
The current strength of sterling is partly the problem. After hitting a high over the summer of 1.71 U.S. dollars to the pound, it has fallen back slightly to 1.66 Friday, but this is still much higher than at the beginning of the year.
In addition Britain’s largest single trade partner, the eurozone, is struggling to find any growth.
With outside pressures making trade difficult, growth for the second half in the British economy can continue to come from only one place, the services sector.