The UK economy is “motoring ahead”.

The UK’s recovery is "motoring ahead", according to George Osborne, the Chancellor, as the latest data from the Office for National Statistics (ONS) showed that the UK economy expanded by 0.7% in the three months to the end of June.

This follows on from growth of 0.4% in the first three months of 2015 and means that the UK economy has now seen 10 consecutive quarters of sustained growth. It also means that output per head is back to pre-crisis levels, as the UK recovery moved further ahead of Germany in the second quarter. According to the ONS, output in the economy during the second quarter was 2.6% higher than the same period a year earlier.

The figures saw the pound rise against the dollar and euro, as traders sense that stronger growth could mean a rise in interest rates is getting closer. Mark Carney, Governor of the Bank of England has previously indicated that sustained growth of "around 0.6% per quarter" could see the remaining "spare capacity" in the economy eliminated and might signal a tightening of rates.

For investors, the figures helped the FTSE100 rise, after the heavy falls on Monday which were driven by the record-breaking drop in Chinese equity markets. So whilst the UK economy is looking in a reasonable state, UK markets will continue to be affected more by the China crisis, negotiations over the third Greek bailout and the potential impact of any future US interest rate rises.

Investors should always be focused on the long term, so whilst short term market corrections may be uncomfortable, not over-reacting to them is usually the right approach, although treating them as a buying opportunity should not be ruled out.

To discuss the above or for help with your investment planning, contact Kellands today.   

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