The second quarter provisional figures for the UK economy’s output show a becalmed services sector, little changed overall on the previous quarter, and over 1% up on a year earlier. The smaller construction sector has had a second sharp quarter’s fall, along with a lesser decline in manufacturing and mining.
Within the large services sector, once again rising real public spending makes a positive contribution to measured output. Financial and business services are also up, though now showing slow growth. Transport and communications are down.
The preliminary figures are based on estimates for June which assume poor performance resulting from the incidence of two bank holidays with the additional time off for Jubilee. The sharp fall in construction so far this year reflects survey evidence, and is probably accounted for by three main changes. The first is the ending of the major Olympics contracts. The second is the impact of the outgoing Labour government’s cuts in public capital spending, which were largely endorsed by the incoming Coalition government. The third is the atrocious weather in the second quarter, which will have delayed work on many sites.
Overall the economy is down 0.9% on a year ago. It leaves us still 4.5% down on the peak prior to the 2008-9 crash. Public current spending remains high. Private demand is less buoyant, where the tight tax and price rise squeeze has left consumers short of cash to spend. Falling inflation should help and is much needed. The construction sector needs more orders. This is why the government is pursuing a number of schemes to try to get private finance into sensible projects.