By Jason Douglas and Nicholas Winning
LONDON--Britain's economy finally overtook its prerecession peak in the second quarter, official estimates showed Friday, more than six years after a global banking crisis caused a sharp downturn.
The Office for National Statistics said the U.K. economy expanded 0.8% in the second quarter, an annualized rate of 3.2%. Gross domestic product at the end of June was 0.2% higher than its precrisis peak in the first quarter of 2008, just before the economy entered recession, the ONS said.
The rise in output in the second quarter is the sixth straight quarterly expansion after a deep recession and long stagnation. The International Monetary Fund Thursday forecast the U.K. to expand 3.2% in 2014, puttingBritain among the fastest-growing advanced economies this year.
The U.K.'s recovery means the Bank of England is on course to be the first of the world's major central banks to call time on crisis-era monetary policy and begin slowly raising interest rates. Investors expect the BOE to begin tightening policy early next year. The U.S. Federal Reserve is expected to follow suit in mid-2015.
The recovery of the economy's lost output also comes ahead of a general election in May. Prime Minister David Cameron and his finance chief, George Osborne, will be hoping Britons will credit them with spurring recovery and return them to power. Polls show Mr. Cameron's Conservatives, who rule in coalition with the smaller Liberal Democrats, are trailing the opposition Labour Party in the polls.
ONS data shows the U.K.'s dominant services sector led the expansion in the second quarter, with output rising 1% compared with the previous three months. Industrial production rose 0.4%. Construction output shrank 0.5%, hurt by a fall in commercial building work in May. Overall gross domestic product was 3.1% higher at the close of the second quarter than a year earlier, the fastest annual growth rate since the final three months of 2007.
The rise in output masks lingering weaknesses in the U.K. economy. A hoped-for rebalancing toward international trade and away from domestic consumption has failed to materialize. Rapidly rising house prices have stoked fears of a real-estate bubble. And Britons' incomes are still being squeezed by feeble wage growth, which hasn't kept pace with inflation.
Write to Jason Douglas at firstname.lastname@example.org and Nicholas Winning at email@example.com
(END) Dow Jones Newswires
July 25, 2014 05:13 ET (09:13 GMT)
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