The climb back continues

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There is even more attention than usual on ONS's first estimate of UK GDP in Q2. Cutting straight to the chase the UK economy grew 0.8% in the three months to June and this takes us back ... finally... to where we were before the crisis hit.

Chart of the yearGDP index, 2008q1 = 100Source: ONS

The UK economy has now seen six consecutive quarters of growth and over this period real GDP has increased by 4.4%. Most sectors of the economy have been contributing to this expansion, with services up 4.4%, manufacturing up 3.5% and construction up 5.6% over this period. Ahead of today's release the IMF announced that it had revised up its expectation for full-year growth in the UK in 2014 to 3.2% - the fastest rate of growth forecast amongst developed economies.

Ground to be made up everywhere you look

Before we all give ourselves a Commonwealth medal for winning the global race, however, there are a couple of issues that are worth flagging.

Obviously from our perspective is the weaker than expected quarter for manufacturing output. The sector expanded by a modest 0.2% in the three months to June, the fifth consecutive quarter of expansion but the weakest three-month period of growth we've seen since 2013q1. This was driven by fairly big falls in output in most sectors in May. Some of this was clearly unwound in June and a whole range of survey indicators suggest that this is not likely to be the start of a much weaker trend in the second half of 2014. However, this still leaves a pretty big gap (of some 8%) between 2008q1 and current manufacturing output levels.

Elsewhere, the run of growth across all sectors came to a halt in q2 with output falling in the construction sector and in agriculture. In contrast, services output increased by a robust 1% over the quarter.

Manufacturing outputIndex, 2008q1 = 100Source: ONS

Secondly, while we're back to where we were before the financial crisis, think about where GDP might have been if the economy had been growing consistently over the past seven years -- that puts the level of catch up into perspective.

Finally, we are far from the first advanced economy to get back over the pre-recession line - many others, including the US about three years ago, managed it well before the UK.

So, policy makers can't yet afford to take the summer off. We still have a hill to climb in building the right conditions for companies to invest in, and export from, the UK. This includes pressing ahead with measures to secure a more highly skilled workforce, accelerating improvements in access to finance and, working on the pipeline of new infrastructure projects.

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