Recovery maintains strong momentum

The 0.8% quarterly rise in Q2 GDP and the pick-up in the composite PMI in July suggests that therecovery still has plenty of momentum. Admittedly, growth has become increasingly dependent onthe services sector. But we expect the recovery to broaden out again before long.Construction should be stimulated by the continued easing of credit constraints and further increasesin house prices. And while the combination of a stronger pound and a weak recovery in the eurozonewill hamper the export-orientated manufacturing sector, robust growth in other export marketsand the scope for exporters to cut their prices suggests that growth in manufacturing output couldstill accelerate from Q2’s meagre 0.2% quarterly rate. Accordingly, we remain upbeat on the outlookfor the UK economy, and expect a 3.3% rise in GDP this year to be followed by 3% growth in 2015.