Instant view - Q2 GDP grows 0.2 percent as expected

LONDON, JULY 26 - The economy grew 0.2 percent in the second quarter of this year, official data showed on Tuesday.

KEY POINTS

- The ONS said the special factors such as the additional holiday for the royal wedding, the after-effects of the tsunami in Japan and the record warm weather subtracted 0.5 percentage points of quarterly growth in the second quarter.

- GDP year-on-year growth was the lowest since Q1 2010

ANALYSTS' VIEWS:

GEORGE BUCKLEY, DEUTSCHE BANK

"This is probably one of the best reports we could have hoped for. There were expectations of a fall -- we didn't get it.

"0.2 is still very weak, but of course a lot of that was being depressed by temporary factors. The ONS said it could have taken 0.5 percent of GDP.

"The point is that we are still well below peak. When you compare that to other countries, we are faring a lot worse in the recovery phase than other countries.

"There is a lot further to go, but I think we will see a bounceback in GDP in the third quarter of the year as these temporary effects dissipate.

"For the moment the recovery remains weak, but this is still a decent number compared to what we potentially could have got and what the fear was for."

PHILIP SHAW, INVESTEC

"Markets may show some relief that there wasn't a contraction. If you consider that the bank holiday for the Royal Wedding probably subtracted a quarter percent or so from growth the numbers aren't that far from being respectable.

"However, looking forward there are a number of headwinds to growth and the policy outlook remains very uncertain."

IAN MCCAFFERTY, CHIEF ECONOMIC ADVISER, CBI:

"This is the third consecutive quarter in which special factors, such as the winter weather, unseasonal North Sea maintenance, the Japanese tsunami and an extra bank holiday, have made interpretation of the data more difficult and have depressed economic activity over the short term.

"There is likely to be some bounce back over the autumn, but it's clear that the underlying economic recovery remains fragile and difficult."

ALAN CLARKE, SCOTIA CAPITAL:

"What seems to have driven this is a stellar bounce back in services output after the Easter fall, but 0.2 percent growth is nothing to get the champagne corks popping.

"The biggest drag on growth at the moment is inflation and that's eating into household disposable income and holding back consumer spending."