Britain's economy picks up speed in second quarter, still below peak

LONDON (Reuters) - Britain's economy sped up in the second quarter, boosted by spending by consumers and businesses, although it remains smaller than before the 2008-09 recession.

Preliminary data from the Office for National Statistics showed gross domestic product rose 0.6 percent in the April-to-June period compared with the previous quarter, in line with forecasts.

The economy grew 0.3 percent in the first three months of the year.

The pick-up in the British economy comes just as other countries in Europe are struggling to get out of recession.

It will be a relief to finance minister George Osborne who has fended off calls from the International Monetary Fund and the opposition Labour party to spend more to speed up growth.

Compared with a year earlier, growth jumped to 1.4 percent from 0.3 percent in the first quarter, its fastest increase since early 2011 although the figure was boosted by an extra working day in the April-June period this year.

It was the first time all sectors of the economy - agriculture, production, construction and services - grew at the same since the third quarter of 2010.

The Bank of England's new governor Mark Carney will welcome the latest sign that the economy is edging closer to what he has termed "escape velocity" or sustainable growth, though he is still likely to judge it needs extra help to get there.

From next month Carney is widely expected to start providing detailed guidance on how long interest rates will remain low, in an effort to encourage consumers to spend and businesses to borrow and invest.

Britain's economy remains 3.3 percent smaller than in the first quarter of 2008 which was its peak before the financial crisis plunged the country into recession.

Thursday's data showed that output in Britain's service sector - which makes up 78 percent of GDP - rose by 0.6 percent in the second quarter after ticking up 0.5 percent in the first three months of the year.

Services provided the strongest contribution to overall growth, adding 0.5 percentage points with the retail, hotels and restaurants and the business services and finance components accounting for the bulk of the increase.

Industrial output was 0.6 percent higher while construction - which now accounts for around 6 percent of GDP after shrinking sharply after the financial crisis - expanded by 0.9 percent.

Upbeat company news this week has reinforced the sense of an economy on the mend.

Pub chain JD Wetherspoon <JDW.L> said it would accelerate new pub openings next year, helped by a better mood among customers, while developer British Land <BLND.L> has invested 512 million pounds ($787 million) in property acquisitions since the start of April.

Consumers, a key engine of Britain's economy, are perking up too. They are now more optimistic about the economy than at any point since April 2010, as measured by a new consumer confidence index by market researchers YouGov and the Centre for Economics and Business Research.

The ONS's preliminary estimates of GDP are among the first released in the European Union, and are based partly on estimated data. On average, they are revised by 0.1 percentage points up or down by the time a second revision is published two months later, but bigger moves are not uncommon.

(Reporting by Olesya Dmitracova and William Schomberg)