GDP to surpass pre-financial crisis levels

George Osborne In Thought

Britain will pass another milestone in its economic recovery this week, with official figures showing it has clawed back all theoutput lost since the 2008 financial crisis.

The economy probably maintained momentum rather than accelerated between April and June, according to economists' forecasts of GDP data from the Office for National Statistics on Friday. They expect growth of 0.8%, unchanged from the first three months of the year, according to a Reuters poll. That will see the economy return to its pre-crisis peak in overall terms, though not when measured per head because of population growth over the past six years.

Disappointing figures from the construction and manufacturing sectors in recent weeks have forced analysts to scale back predictions, and some think the 0.8% forecast may prove too punchy.

"If there is going to be a surprise, we think it is more likely to be on the downside than the upside," said Alan Clarke, an economist at Scotiabank. "While the disappointing industrial and construction output data for May on their own are not enough to cause the pace of GDP to slow, they could be an early warning of how the services sector also performed in May."

The thinktank Capital Economics is not expecting anything spectacular from Friday's figures either, but if the pace of growth is kept up, output will be 0.2% higher than its previous peak at the start of 2008, marking "another milestone for the recovery", it said.

While the latest official data has disappointed, business surveys have been more upbeat. The mixed picture overall has clouded the outlook for interest rates. Financial markets are pricing in a rise by the end of the year from the current record of low of 0.5%, but economists are more divided.

Minutes from the Bank of England's latest policy meeting released on Wednesday will be pored over for clues of when the first hike might come.

There have been warnings, however, that the economy is over-reliant on consumers and that overall growth could lose momentum in the second half of the year.

Powered by Guardian.co.ukThis article was written by Katie Allen and Jonnie Bird, for The Guardian on Sunday 20th July 2014 15.59 Europe/London

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