UK growth accelerates; Greece begins talks with creditors - as it happened

PS: Don’t miss this piece on child poverty in the UK ; worth considering alongside today’s ‘encouraging’ GDP data:

That may be all for today, I think. I’ll be back if there’s any major news out of Greece. Otherwise, enjoy the afternoon..... GW

Greece has been given the green light to re-open its stock market, according to Bloomberg.

It’s almost a month since the Athens exchange was closed, when capital controls were implemented.

Those bailout talks in Greece have not got off to a great start:

Standard & Poor’s has issued a warning that monetary policy is diverging, in both major economies and developing ones.

The US is likely to raise interest rates in September, S&P reckons, followed by the Bank of England. In contrast, the European Central Bank is continuing to ease policy with its €60bn/month stimulus programme.

S&P senior economists Tatiana Lysenko predicts:

“Over the next 18 months, we expect tightening of monetary policy in Turkey and South Africa--the countries with large external deficits that are vulnerable to a reversal in global capital flows.

In Latin America, we expect both Brazil and Mexico to tighten monetary policy, albeit for different reasons.”

But banks in the Asia-Pacific are likely to ease policy. Ditto Russia, although this might not be possible if there is fresh turbulence in the currency market.

The tale of former Greek finance minister Yanis Varoufakis’s secret Plan B for a parallel payment system has taken another twist.

The European Commission has robustly denied Varoufakis’s claim that Greece’s creditors had control of the computer systems of the tax offices, forcing him to consider hacking into it.

Details of Varoufakis’s plan leaked over the weekend, after he disclosed them on a conference call with hedge fund managers.

Unbowed, he’s now published a comment piece in the FT defending his plan, claiming the new system would have provided urgently-needed liquidity, by allowing firms to offset tax payments against outstanding bills:

Time to look at Greece. And in Athens the inspector tour by international auditors continues apace – under draconian security.

Our correspondent Helena Smith reports.

At no time in the five years that international monitors have visited Greece has security been as visible or tight.

After the very public row of where to host officials representing the EU, ECB, ESM and IMF and what to let them see, Greek authorities have now gone the other way throwing a security ring around them like no other.

As auditors kicked off their inspection tour with a visit to the State General Accounting Office – the government agency that oversees financial management of the Greek state – police trailed them on the streets while a helicopter monitored their every move overhead. Some 250 police are believed to have been seconded to guard the Athens Hilton where the teams are now staying.

The draconian measures will be stepped up when mission heads join the technical teams later this week. In the past mission chiefs have been the focus of protests with demonstrators not only heckling the auditors but on one occasion throwing coins at them. The imposition of new biting austerity – by a leftist government no less – has raised fears of impromptu protests again.

All of which might explain why Alexis Tsipras’ government is still trying to play down the visit.

“Whatever there is to learn from the meetings you will learn from the coordinators of the negotiation on the part of the government,” the deputy finance minister Dimitris Mardas told reporters outside the General Accounting Office shortly after technical teams had slipped in.

“We are informing [them] and giving the information that is needed so that the negotiations move normally.”

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The decision on whether to raise UK interest rates will soon fall, in part, on the shoulders of economist Gertjan Vlieghe.

He’s just been named as the newest member of the Bank of England’s monetary policy committee.

Vlieghe, who starts in September, is currently a partner at hedge fund giant Brevan Howard. He’s previously worked at Deutsche Bank.

Vlieghe will be an ‘external’ member of the MPC, replacing David Miles. But he won’t need any help finding his way around the BoE - as he was once an advisor to former governor Mervyn King.

Time for a recap on the GDP figures, by Jill Treanor:

Britain’s economic growth bounced back in the second quarter of the year, according to official data on Tuesday, fuelling the debate about the first rise in interest rates since the financial crisis.

There were also signs that living standards are returning to their pre-crisis levels as the Office for National Statistics said that GDP per head was now “broadly equal” to the first quarter of 2008, before the economic crisis drove the UK into recession.

After a slowdown in the first three months of the year to 0.4%, the first estimate for second quarter growth stood at 0.7%, in line with City expectations, but just off the pace of growth recorded at the end of 2014.

The growth was fuelled by the service sector, which will stoke fears that the recovery is not spreading to all sectors of the economy. Manufacturing, one of the sectors targeted by the government, fell by 0.3%.

Vicky Redwood, chief UK economist at Capital Economics, said: “Admittedly, growth remains very unbalanced. The services sector drove the rise in GDP, while construction output was flat and manufacturing output fell. But at least it looks as though productivity growth is continuing to pick up”....

Here’s Jill’s full story:

My colleague Katie Allen writes that while Britain’s economy is growing at a decent rate, the underlying picture is less cheery - with many people still finding the labour market tough:

The Bank of England’s chief economist, Andy Haldane, has warned about this as he makes the case for holding off a potentially damaging early interest rate rise.

“There are still people without a job who would like a job; there are still people with jobs who would like to work more hours. And, even for those that have got jobs, their pay – in most cases – isn’t racing away,” he told BBC Newsnight last week.

The latest analysis of what jobs are available gives yet more reasons for caution. Advertised salaries have fallen to an 11-month low, as growth in the workforce is driven by lower-paid roles and part-time positions, according to jobs search engine Adzuna.co.uk which aims to list every vacancy advertised.

These latest GDP figures underline the very British addiction to low-paid labour rather than more innovative and productive economic activity. For all the government’s pledges to rebalance the economy, the dominant services sector is the only part of Britain’s economy to be back to its pre-crisis peak.

Here’s Katie’s full analysis:

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Chris Leslie MP, Labour’s shadow chancellor, fears Britain’s economy isn’t balanced enough to handle fresh problems in Europe and China, or a slowing world economy.

“The OBR has revised down productivity next year and for three years after that. Manufacturing is down by 0.3% and the Government is on course to miss its exports target by hundreds of billions of pounds.

“The Chancellor is complacent at a time when he should take action to support exporters and strengthen Britain’s infrastructure. Pulling the plug on major rail electrification and hitting households next April with a work penalty in the tax credit system are the wrong choices for the long term.”

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The 0.3% decline in manufacturing output in the last quarter has alarmed Britain’s trades unions.

TUC General Secretary Frances O’Grady said:

“The government’s economic plan is not delivering what was promised. We were told there would be a march of the makers, but instead manufacturing continues to decline. And while there is a desperate need for affordable homes, construction output remains in the doldrums.

“We need a new plan for productivity and growth, because the current one is not delivering across the whole economy – a plan with stronger investment in infrastructure, innovation and skills. But the cuts the Chancellor is planning will damage demand and run the risk of reducing future growth.”

Andrew Sentance, senior economic adviser at PwC, is also struck by how private sector service firms are leading the recovery, thanks to consumer spending.

Activity in retailing, hotels, restaurants and related services is 4.5% up on a year ago and the output of transport services has risen by 3.7%. Business and financial service growth in the past year is also over 3%.

Manufacturing output and public services are much more sluggish, with output growing by just 0.5% or so over the past year

Britain’s factories probably suffered from the weak European economy and stronger pound, says Jeremy Cook of World First:

“People are spending money because they feel more secure in their jobs and those jobs are starting to pay more than inflation is taking away.

“The environment for manufacturers is less pleasant. Despite the government’s pledges to drive a ‘march of the makers’ and reinvigorate the UK’s manufacturing sector, growth remains hard to come by.

“A 0.3% contraction can be chalked up to many things, but weakness in Europe and the overt strength of the pound will not be helping matters.

I now understand George Osborne’s motoring references:

The pound jumped when the GDP data was released, as traders anticipated that stronger growth made an interest rate rise more likely.

Sterling has gained half a cent against the US dollar today.