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Car buyers boost UK economy in second quarter

UK car sales up 4.5%, boosting UK economic growth
UK car sales up 4.5%, boosting UK economic growth

UK consumers spent an extra £661m sterling in the three months between April and June, lifted by purchases of cars which rose 4.5% on three months earlier.

Latest official figures showed household spending rose by 0.3% during the quarter - but this was revised down from an earlier estimate of 0.4% growth - making it the smallest increase for three quarters.

The third estimate of gross domestic product (GDP) in the second quarter was unchanged at 0.7%, the Office for National Statistics said.

But there was a sharp upward revision for construction, which is now estimated to have grown by 1.9% during the quarter from a previous 1.4% estimate, as state stimulus schemes fuel the housing market.

And Britain's factories also expanded more than thought, with manufacturing output rising by 0.9%, compared with a 0.7% first estimate.

Overall growth in the first quarter of this year was lifted to 0.4% from 0.3%, but growth in the third and fourth quarters of last year were revised down.

Economists said the figures showed Britain's recovery "gained momentum" in the second quarter, with hopes building that the economy can expand further between July and September.

Spending on transport, and cars in particular, was the biggest driver of rising consumer purchases, while there were also increases in spending on clothing and footwear. But there were falls in spending on food, alcohol and tobacco.

Rising spending on cars echoed recent industry figures from the Society of Motor Manufacturers and Traders which showed year-to-date car production is up 3.1%, at 984,545. But the ONS said household spending is still 2.8% below its late-2007 peak.

Household disposable income rebounded by 1.5% in the latest quarter following a fall of 1.7% in the previous three months.

The household savings ratio also increased to 5.9% from 4.4% during the quarter - but down from 6.8% across the whole of 2012.

Separate data on investment by businesses cast a shadow over the largely positive set of figures, falling by £786m or 2.7% on the prior quarter.

The UK's dominant services sector recorded unchanged growth of 0.6% during the quarter.