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U.K. Economy Rebounds in Second Quarter

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08/10/2018 | 05:14am EDT

By Jason Douglas

LONDON -- The U.K. economy accelerated in the second quarter after a soft start to the year, as balmy weather and the buzz surrounding the soccer World Cup fired up consumer spending.

The figures suggest the economy is poised for another year of slow but steady growth ahead of Britain's planned exit from the European Union in March 2019, provided negotiators can agree on terms for withdrawal in the final months of talks.

The U.K. economy expanded at an annualized rate of 1.5% in the second quarter, the Office for National Statistics said Friday, picking up sharply from the 0.9% rate recorded in the first three months of the year.

The agency's preliminary estimate suggests the U.K. outpaced the neighboring eurozone in the second quarter, where growth came in at 1.4%, its slowest expansion in three years.

The U.S., by contrast, grew 4.1%, its fastest pace since the third quarter of 2014. Japan expanded by 1.9%.

The figures highlight how big economies are diverging after a rare year of synchronized growth in 2017. The big risk for growth in the months ahead is that escalating trade tensions between the U.S. and its biggest trading partners spill over into a full-blown trade war.

For Britain, the outlook is further clouded by its looming exit from the EU. London and Brussels have yet to agree on terms for withdrawal with just seven months to go until Brexit day at the end of March. Economists, policy makers and business executives warn that failure to reach a deal could send the economy into a tailspin.

Mark Carney, governor of the Bank of England, said this month that the odds of a no-deal Brexit were "uncomfortably high," reflecting wider unease at limited progress in negotiations. Both sides say they want to reach an agreement, though differences remain over issues including Ireland's border with Northern Ireland, part of the U.K., future customs arrangements and the role of EU courts in settling disputes.

ONS figures Friday showed growth in the U.K. remains heavily dependent on consumers. Consumer and government spending offset a feeble performance from exports in the second quarter, while data showed manufacturing output shrank.

Write to Jason Douglas at jason.douglas@wsj.com

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