The wrong sort of growth?

The latest data suggests an economic recovery is finally here. But is it coming from the wrong direction?

Even before Andy Murray lifted spirits with his Wimbledon victory, the feel-good factor had returned to Britain, as the latest data suggested an economic recovery is finally here. Almost two-thirds of members of the Institute of Directors think the outlook is brighter than at any time since 2008. Barclaycard says consumer spending rose at its highest rate in 18 months in June. Improved data from the housing market may be boosting household confidence. House prices, as measured by Halifax, are growing at 3.7% a year, a three-year high. The International Monetary Fund (IMF) nudged up its 2013 UK GDP estimate from 0.6% to 0.9%.

But May's manufacturing surveys were disappointing, given the upbeat tone of recent surveys. The sector shrank for a second month in a row. May's trade deficit, moreover, was the widest monthly shortfall this year. Sterling fell to a three-year low against the dollar, undermined by new Bank of England governor Mark Carney's forward guidance'.

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