Business Blog Posts

27 August 2010 Last updated at 05:11 ET

The UK economy grew by more than initially thought in the second quarter of 2010, boosted by a strong performance by the construction sector.

The economy grew by 1.2% in the quarter, the Office for National Statistics ONS said, revising up its initial estimate of 1.1% growth.

That was the fastest rate of quarterly expansion recorded since the first three months of 2001.

But one area that suffered a big fall was air transport, which fell 11%.

The first estimate of GDP is usually revised twice at monthly intervals.

Positive effect

The ONS said construction output grew by 8.5% in the second quarter, up from a previous estimate of 6.6%.

Aileen Simkins from the ONS said the overall effect in the quarter had been "very positive".

She said the fall in air transport reflected the effect in April of the ash cloud as well as the British Airways strike.

A spokesman for the Treasury said: "While the government is cautiously optimistic about the path for the economy, the job is not yet done.

"The priority remains to implement the Budget policies which support economic rebalancing and help ensure the sustained growth that the Office for Budget Responsibility forecast this year and next."

Eyes on the road

Growth in the key services sector, which accounts for about three-quarters of the UK economy, was revised down to 0.7%.

Within the sector, business services and finance posted a rise of 1.5%, revised up from 1.3%.

But business leaders warned that the strong pace of growth would not last.

"Todays figures are obviously good news but we shouldnt get carried away," Graeme Leach, chief economist at the Institute of Directors, said.

"Instead of looking in the rear view mirror at what has passed it would be wiser for us to keep our eyes on the road ahead. We dont expect this level of growth to be sustained through the second half of 2010.

"But whether or not this slide will turn into a quarterly decline or a double dip recession remains highly uncertain."

27 August 2010 Last updated at 03:07 ET

Japans core consumer prices index fell for the 17th month in a row in July, underlining the countrys entrenched problems with deflation.

The index, which excludes fresh food, fell 1.1% from July last year.

Deflation is adding to economic worries in Japan, where the strong yen is making exports more expensive.

Japans "lost decade" of deflation in the 1990s hit company profits as consumers delayed purchases to await even cheaper deals.

The fall in the consumer prices index was slightly bigger than the 1% drop in June.

The Bank of Japan has so far held off from any substantial measures to tackle deflation, forecasting that consumer prices will turn positive in the fiscal year to the end of March 2012.

Japans government was due on Friday to outline measures to support the economy and contain the strong yen, which hit a 15-year high against the dollar this week and could derail an export-led recovery.

"Given the yens gains, exports will slump temporarily and slow Japans economic recovery. Japan will thus remain in deflation for another two to three years," said Takeshi Minami, chief economist at Norinchukin Research Institute.

Earlier on Friday, Finance Minister Yoshihiko Noda told reporters that the yens strength was having "various impacts" on the economy and that the situation was "serious".

27 August 2010 Last updated at 02:06 ET

Boeing is delaying delivery of its first new-generation 787 Dreamliner aircraft until early 2011.

Japans All Nippon Airways was due to take delivery of the aircraft at the end of this year.

The 787 project has already been delayed for more than two years, following a series of hitches.

Boeing announced on Friday that the latest setback was due to the availability of an engine needed for the final phases of flight testing.

The company said that it now expected All Nippon to take delivery of the aircraft in the middle of the first quarter of 2011.

The 787, being built in Seattle, is Boeings most sophisticated plane yet. The company claims it will be lighter, faster and emit less CO2 than similar-sized planes currently flying.

It made its maiden flight in December 2009 and was a star feature at Julys international airshow at Farnborough in the UK.

26 August 2010 Last updated at 20:28 ET

Defence manufacturers have asked David Cameron to clear up confusion over how the replacement for Britains nuclear deterrent will be funded.

The chairman of the industry body ADS, Ian Godden, said uncertainty over the Trident missile system was unsettling both investors and the UKs allies.

There are concerns as to what way the successor to Trident would impact on wider defence spending.

Trident is due to be replaced in the 2020s at an estimated cost of �20bn.

BBC defence correspondent Caroline Wyatt said the Conservatives commitment to a like-for-like replacement has not been shared by the Liberal Democrats, who promised in their manifesto to seek a cheaper alternative.

The letter sent to David Cameron is a clear sign of just how worried manufacturers are about the potential impact of making the Ministry of Defence bear the full costs of the Trident replacement, our correspondent added.

In the message, Mr Godden said the UK-based defence industry had "reflected with great concern on the recent statements by senior ministers in the media about the nations nuclear deterrent".

Budget concerns

He added: "The uncertainty caused by these statements will be as unsettling for investors as it must surely be for our allies.

"A decision to move Trident renewal to the defence budget without a commensurate transfer of funding calls into question the integrity of the Strategic Defence and Security Review process and complicates the future funding of our conventional capabilities and our nations ability to support its allies.

"It is vital that this confusion is cleared up as soon as possible."

The previous government promised that the estimated �20bn needed to build Britains next nuclear deterrent would come from a separate budget.

But the Chancellor, George Osborne, has insisted the money must be taken from the already over-stretched defence budget - currently about �37bn a year, or 2.2% of GDP.

That has led to a public tussle with the Defence Secretary Liam Fox over the funding.

The MoD is currently conducting a wide-ranging review of Britains future military needs, and is already having to come up with options for cuts of up to 20%.

If the MoD had to bear the full cost of the replacement, the cuts to the UKs conventional forces and equipment would be even deeper than expected.