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UK GDP trumps expectations, with Brexit impact unclear

British GDP results beat expectations

The U.K. economy grew by 0.6 percent in the second quarter of the year, quarter-on-quarter, according to the first official estimate out since the country's Brexit vote stunned global markets.

Analysts had expected second-quarter economic growth to come in at 0.4 percent, with activity seen strong in April and May and much weaker in June, around the time of the referendum.

Kallum Pickering, senior U.K. economist at Berenberg, told CNBC the data were "certainly a surprise on the upside."

"What strikes me the most is that the economy accelerated heading into the EU referendum," he said.

The U.K.'s Office for National Statistics (ONS), who produced the data, noted that the preliminary estimate used only half the information required for the final figure. The new figures include data from the three months ending June 30, with the referendum having taken place on June 23.

Sterling slips

Sterling fell slightly against the U.S. dollar to just below $1.311 after the data were out. The benchmark FTSE 100 stock index rose slightly, as did the more domestically focused FTSE 250 index of mid-cap stocks.

Construction output decreased by 0.4 percent in the second quarter of 2016, following a decrease of 0.3 percent in the first quarter, according to the official data.

However, service sector activity rose by 0.5 percent in the second quarter. Industrial production was very strong at 2.1 percent.

The U.K. construction industry, which is a major contributor to the economy, is seen taking a big hit from the Brexit vote, due to its reliance on large-scale projects that may now be delayed or cancelled.

"While only the construction sector was exhibiting signs of pre-referendum jitters, more widespread signs of weaker demand expectations and flagging confidence means that this is likely to be as good as it gets for the U.K. economy —certainly for the rest of this year," Lee Hopley, chief economist at EEF, a lobbying group for U.K. manufacturing, said in a statement on Wednesday.

'Whatever action is necessary'

Sterling's decline after Wednesday's data may be because an interest rate cut by the Bank of England is now seen as less likely.

However, Philip Hammond, the new finance minister, reiterated on Wednesday that both the government and the central bank would take "whatever action is necessary to support our economy," according to Reuters.

The U.K. public surprised many analysts and pollsters when it voted to quit the European Union in a vote on June 23. This is seen as a negative for the economy, at least in the short-term.

The flash Purchasing Managers' Index (PMI) for July from Markit last week suggested the U.K. economy shrunk at its fastest rate since early-2009 after the referendum and indicated third-quarter growth statistics might show a contraction.

Goldman Sachs and other economists have forecast a recession by 2017. Remitting actions by new Prime Minister Theresa May and her cabinet, and perhaps stimulus from the Bank of England, may help decide the matter.

UK suffers sharpest wage fall

Also on Wednesday, the U.K. Trade Union Congress reported that British workers had suffered a steep fall in real wages equaled only by Greece among members of the Organization for Economic Co-operation and Development.

Between 2007 and 2015, U.K. and Greek wages fell by 10.4 percent in real terms. The only other country listed where wages fell was Portugal, by 3.7 percent, the body said.

Employment fell sharply during that period in both Greece and Portugal — and many other European countries — but rose by 0.6 percent in the U.K.

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