"The new GDP estimates for Q2 2006 were higher than the financial markets predicted. We welcome the stronger growth in Q2 2006 but are concerned that today's GDP figures will reinforce the pressures on the MPC to announce early increases in interest rates. We urge the Bank of England to react with caution and to consider the fragility of the economy and the serious risks facing businesses, before tightening policy..
"Quarter-on-quarter GDP growth was 0.8pc in Q2, after 0.7pc quarterly growth in the previous two quarters. Year-on-year growth improved to 2.6pc in Q1 2006, after 2.3pc in Q1 and 1.8pc in Q4 2005. The service sector was the main driver of the recent upturn in the economy, with quarter-on-quarter growth of 1.0pc in Q2 and year-on-year growth of 3.6pc. Manufacturing, though still much weaker the service sector also recorded positive growth in Q2, at 0.5pc quarter-on-quarter and 0.7pc year-on-year
Mr. Kern concluded: "We fear that the figures published today may give an exaggerated impression of the scale of the underlying UK recovery. Preliminary GDP figures have often been revised up in the past, but we believe this may not be the case with today's estimates. We are concerned that the preliminary Q2 figures may underestimate the negative impact of net exports on GDP, and may have to be revised down in due course."