Recovery reaches its high-point

The economy managed a much stronger than expected expansion in the second quarter, with GDP rising by 1.1%. (See Chart.) However, this is likely to be as good as it gets for this stage of the economic recovery. Timelier measures of activity such as the CIPS/Markit surveys and the Bank of England agents’ scores have tentatively softened, while consumer confidence has continued to fall. Although GDP growth this year as a whole may now get to 1.5% or so, we doubt that growth next year will be any stronger and still expect a sub-par 2% in 2012.