Despite nervousness in the build up to the EU referendum and a general feeling of uncertainty, the UK economy actually grew in the second quarter of the year, according to data from the Office for National Statistics. 
Preliminary estimate GDP figures, which are compiled using around 44 per cent of the overall data, show the economy grew by 0.6 per cent in the second quarter, up from the 0.4 per cent growth seen in the first quarter and higher than the 0.5 per cent forecasted by economists.
It also marks the 14th consecutive quarterly expansion of the UK economy.
The areas pulling the figures higher were services, which grew by 0.5 per cent, and industrial production, which rose by an impressive 2.1 per cent - its biggest gain this millennium.
However, as many expected construction slowed by 0.4 per cent, as there were concerns that a Brexit vote could mean a slowdown in the housing sector, while agriculture fell by around 1 per cent.
The market responded positively with the FTSE 100 hitting its highest level this year on the back of the data, despite the fact the figures were generated before the EU referendum.
Performance of index year-to-date
Source: FE Analytics
The market may have risen 37 points at lunch, but analysts were more mixed on what the figures really meant for the economy, and whether pre-Brexit data is even relevant in a post-Brexit world – especially given today’s gloomy flash PMI survey.
Lloyds Bank Commercial Banking – “The economy looks relatively well placed”
Adam Chester, head of economics at Lloyds Bank Commercial Banking, says though these figures are subject to a wider margin of error than usual around the referendum, the report looks firm.
“So much for the supposed slowdown in the run up to the referendum,” he said.
“Although second quarter growth may be revised down at a later stage, based on today’s reading, the economy looks relatively well placed to face into the immediate challenges ahead,”
“The improvement comes hot on the heels of a fall in the unemployment rate to an 11-year low of 4.9 per cent.”
Hargreaves Lansdown – “It might not turn out as bad as the doom-mongers predicted”
Ben Brettell, senior economist at Hargreaves Lansdown, says the GDP figures can’t be taken as evidence of the economy since the vote, it does show a lack of concern for Brexit, and while the UK may dip into a recession following the EU referendum, it does so from a stronger position than many thought.
“It’s always difficult to tell where you’re going by looking in the rear-view mirror, and as such today’s GDP figures can’t be taken as evidence of the current climate,” he said.
“However, what they do show is an absence of pre-Brexit concerns, meaning that if the forecast downturn does materialise, at least we start from a position of relative strength.”
“With confidence this low, a recession can become a self-fulfilling prophecy. Yet there are also tentative signs things might not turn out as bad as the doom-mongers predicted before the vote.”
AXA Wealth – “Not too much should be read into this statistic”
Adrian Lowcock, head of investing at AXA Wealth, agrees that the figures show little sign of how the economy will perform post-Brexit, with the market unlikely to know until October.
“Whilst it does show the UK recovering from a slow down earlier in the year and solid growth in our services sector, given the result of the EU referendum this data is a historical figure,” he said.
“The true impact of the decision to leave the EU on GDP is unlikely to be seen until October when we get the first estimate for the third quarter covering the first three months after the vote”.
ETX Capital Data – “Brexit shock was large”
Neil Williams, market analyst at ETX Capital Data, says the data shows that the Brexit came as more of a shock than realised.
“A month on from the Brexit vote there’s been some fairly upbeat reports this morning, but it’s very early days and the wider picture looks gloomy,” he said.
“GDP growth hit 0.6 per cent in the second quarter – evidence that the UK economy was expanding a fairly healthy clip ahead of the Brexit vote.”
“But the evidence since the referendum is less rosy. Last week’s flash PMIs were extremely poor and showed the UK economy contracting at the quickest pace since the start of 2009.”
“The CBI’s business confidence survey was equally downbeat despite a rise in output, which indicates a ‘confidence shock’ from the vote which could ultimately depress demand and activity.”
Pantheon Macroeconomics – “Q2’s GDP figure is not as robust as it seems at face value”
Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, says the figures have been swayed by a particularly strong rise in energy supply following the mild winter, with most of the economy slowing.
“Acceleration between the first and second quarter entirely reflected a pick-up in quarter-on-quarter growth in industrial production to 2.1 per cent,” he said.
“Although manufacturing output rose by 1.8 per cent, the strong growth in industrial production also reflected unsustainable support from a 4.7 per cent surge in energy supply following an unusually mild winter. The rest of the economy slowed.”
“Meanwhile, the collapse in all surveys of activity and confidence undertaken since the referendum suggest GDP is on course to contract in the third quarter.”
