Plan to fight inflation taking effect, Hunt says as economy grows in second quarter

Chancellor Jeremy Hunt said on Friday the government's effort to tackle inflation were beginning to have an effect, commenting on the release of data showing unexpected growth in the second quarter.

“The actions we’re taking to fight inflation are starting to take effect, which means we’re laying the strong foundations needed to grow the economy," Hunt said in a statement.

Britain's economy expanded slightly over the second quarter thanks to strong output in June and despite inflation remaining high, official data showed Friday.

Gross domestic product grew 0.2 per cent in the April-June period after output expanded 0.1 per cent in the first quarter, the Office for National Statistics said in a statement.

"Across the quarter as a whole, GDP grew a little with widespread growth across manufacturing, aided by falling raw material prices," said Darren Morgan, director of economic statistics at the ONS.

The economy grew by a stronger-than-expected 0.5 per cent in June, sending the pound higher against the dollar in early London trading.

Output in June was lifted especially by strong manufacturing and construction output, the ONS added.

The strong performance at the end of the quarter came despite UK inflation remaining close to 8 per cent, causing the Bank of England to last week raise its key interest rate for a 14th time in a row.

Despite Friday's bright data, economists said the UK remained at risk of recession this year, especially as the growth numbers could see the BoE keep on raising interest rates.

June's output rise "was mostly due to the return to the normal number of working days" in the month after a public holiday in May for the coronation of King Charles III, noted Ruth Gregory, deputy chief UK economist at Capital Economics.

"We still think that with most of the drag from higher interest rates still to come, GDP will fall in the third quarter and a mild recession will begin," she added.