Europe Ahead: UK growth to remain unrevised, boosted by rise in exports

Despite the improvement signaled recently in the UK, fears that the economy might fall back into recession or face a slowdown in recovery are still persisting amid the ease in the pace of global recovery, especially in the United States and emerging economies.

After six consecutive quarters of contraction, the British economy recorded the first expansion in the first quarter, followed by 1.1% growth in the second quarter according to the advanced reading.

Today, Britain will release GDP preliminary reading for the second quarter where the reading will be annexed with details which explain the reason behind the growth spike to 1.1% from 0.3% in the first quarter.

Analysts expect the preliminary reading to match the advanced reading with 1.1% expansion on the quarter and 1.6% growth on the year. Details are expected to show that growth was boosted by the rise in exports which is predicted to show a rise to 2.1% from -1.7% in the first quarter, imports will increase to 1.8% from 1.6% and private consumption is estimated to climb to 0.5% from -0.1%.

Although the advanced reading surprised markets, it actually reflected the successful pace for the economy after a flurry of better-than-estimated data.

Unemployment lingered at 7.8% with the announcement of stellar earnings from British companies which positively affected consumer spending and confidence.

Also, inflation started to ease from 17-month high in April to 3.1% in July and according to the Bank's latest expectations inflation would range at 1.5% by the end of 2012.

According to details, growth was supported in the second quarter by the climb in exports which is a net result of the depreciation in the value of the sterling which slipped to a low of 1.4229 against the dollar in May then started to rebound from June.

However, the key contribution came from the monetary measures adopted by the BoE as policy makers kept both interest rate and APF quantity unchanged till August and most probably will keep them steady for the rest of the current year to enhance growth further on expected slowdown.

In the latest BoE quarterly inflation report, the bank lowered growth forecasts to 3.0% from of 3.6%. Although the budget deficit is shrinking, but some expects that it will affect growth in the coming period due to the severe spending-cut plan announced by George Osborne on June 22.