–Adds Quotes From National Statistics To Earlier Versions
–Q2 GDP +0.2% q/q; +0.7% y/y;
–Q2 GDP median forecast +0.2% q/q; +0.8% y/y

LONDON (MNI) – Quarterly economic growth slowed in the second
quarter as the impact of the Royal Wedding and the Japanese Tsunami hit
output, figures released by National Statistics showed Tuesday.

Gross domestic product rose by 0.2% on the quarter and by 0.7% on
the year, broadly in line with the median forecast for a quarterly
increase of 0.2% and a 0.8% rise on the year.

The outturn is below the latest forecast from the Bank of England
which was for GDP to rise by between 0.3% and 0.4% on the quarter in Q2.

While the slowdown in growth from a 0.5% quarterly rise in Q1 is
disappointing, National Statistics said that a number of one-off special
factors had hit growth during the quarter.

These special factors included the additional bank holiday for the
Royal Wedding, the Royal Wedding itself, the after-effects of the
Japanese Tsunami and record warm weather in April.

National Statistics Chief Economist Joe Grice said that there may
be some further dampening effects from the impact of the Japanese
Tsunami in the third quarter, but the other downward effects were unique
to the second quarter.

“We may still have something to come from further downstream
effects from the Japanese tsunami in terms of component shortages for
manufacturing and so on. For the most part we would expect these special
effects to be one quarter events,” Grice said in comments to the BBC.

National Statistics said it estimated that the net downward impact
on GDP growth from these special factors in Q2 could have amounted to up
to 0.5 percentage point, meaning that without them growth would have
risen by a far more healthy 0.7% on the quarter.

It is likely that some of this output may be lost but we should
also see some bounceback in Q3 as well. Grice said that there would
likely be an upward effect on the Q3 growth rate, adding that this was
simply an arithmetical effect from Q2’s weaker outturn.

After GDP contracted by 0.5% in the fourth quarter of last year and
rose by 0.5% in the first quarter of this, Grice took the view the
latest data offered some evidence of accelerating growth.

“We have had six months or so when the economy was pretty flat”
followed by “probably something of a quickening in the pulse in this
quarter,” Grice said.

Services output rose 0.5% on the quarter in Q2 following a 0.9%
rise in Q1, with strong growth seen in transport, storage and
communications of 1.1%. Business services and finances output rose 0.7%,
while distribution, hotels and restaurants growth stood at 0.3%.
Government and other services output was unchanged between Q1 and Q2.

The May Index of Services showed 1.6% growth over April, and Grice
said “on the whole that seems to be a reasonably robust picture.”

The rise in second quarter services output was partially offset by
a 0.3% quarterly fall in manufacturing output and a far larger 1.4% fall
in the wider measure of industrial production, as utilities output
plunged due to the warm weather.

Construction output was up 0.5% on the quarter following a 3.4%
fall in Q1, while agricultural output fell 1.3%.

–London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

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