BUSINESS LIVE: GDP growth beats expectations

Richard Hunter, head of markets at Interactive Investor:

‘The latest release of GDP data shows a UK economy which continues to confound with its resilience, yet where growth is marginal and therefore likely to be thrown off course by a succession of rate rises and potentially more to come.

‘Of itself, the reading is economically positive but by the same token it complicates the decision which the Bank of England now faces in terms of its next interest rate decision, particularly if it chooses to tighten further and potentially incite a recession.’

Asset managers have been told to justify the fees charged on their funds.

The Financial Conduct Authority said a review of fund managers showed that profitability concerns are influencing how much to charge clients.

The rise of passive investing in recent years has spurred competition within the industry, forcing some funds to reduce their fees.

Matt Britzman, equity analyst at Hargreaves Lansdown:

‘The FTSE100 looks set to open lower today, quickly giving up gains seen in yesterday’s session despite fresh GDP data that shows the UK economy didn’t flatline over the second quarter as some economists had predicted.

‘We’ve got June to thank for the better-than-expected result, where growth of 0.5% pulled up the quarter after a small decline in May. These numbers push the chance of a recession further down the line, but the UK economy looks firmly stuck in a low growth cycle, and with further interest rate hikes firmly priced in by the markets – there doesn’t look to be an immediate path out.

‘UK investors look to have taken June’s positive inflation print as a sign of hope, and today’s GDP read should add to that, with scores for both economic growth and investor confidence rising in early August after three months of consecutive declines. But there’s no escaping the fact the UK’s inflation performance sticks out like a sore thumb compared to other global economies, and investors should strap in for further rate hikes.

‘There are further glimmers of hope from the mortgage market, where several key lenders have lowered rates on a range of fixed-term mortgages. Let’s not get ahead of ourselves though, anyone looking to buy a first home, remortgage or move house right now is still facing some pretty gruesome looking numbers, and next week’s CPI print has a lot riding on it.’

Chief economist at the Institute of Directors Kitty Ussher:

‘This is an encouraging set of data showing an economy performing strongly in June.

‘There was decent growth in both retail and manufacturing, helped by a positive rebound effect from the previous month when activity had been reduced due to the extra bank holiday for the King’s Coronation.

‘Looking across the full three months of the second quarter, we also see economic growth picking up compared to earlier in the year, although today’s initial estimates are subject to revision. In particular, car production has benefited from falling input prices, and consumer demand has also proved resilient, helped by decent weather in June.

‘However the quarterly data also shows a worrying decline in business investment in ICT and machinery following the expiring of the government’s super-deduction allowance at the end of March. It also shows falls in expenditure on scientific R&D, advertising and market research, which could be an early indicator of difficulties ahead.’

The British economy grew faster than expected in June, with firms citing the extra May bank holiday as a driver of output, Office for National Statistics data shows.

GDP growth came in at 0.5 per cent for the month, surpassing expectations of 0.2 per cent, while growth for the second quarter overall was 0.2 per cent.

‘The actions we’re taking to fight inflation are starting to take effect, which means we are laying the strong foundations needed to grow the economy,’ Chancellor Jeremy Hunt said.