The ONS' second estimate of Q2 GDP saw growth revised up by 0.1pp to 1.2% q/q, an outturn that was in line with our expectation (consensus: 1.1%, BarCap: 1.2%). Today's outturn means that GDP in Q2 was 1.7% stronger y/y. We had expected today's revision based on the ONS' earlier upward revision to construction output in Q2.
 
Today's release provided us with our first expenditure-based estimate of Q2 GDP, and showed that private consumption grew by 0.7% q/q (BarCap: 0.4%). This was the strongest quarterly growth in private consumption since Q1 08, and seems to give further weight to the argument that Q1's weak private consumption (-0.1% q/q) reflected temporary factors. Indeed, the BoE judged in its August Inflation Report that in the absence of temporary factors the path of consumption would likely have been smoother, with Q1 printing a stronger outturn than it did.
 
Meanwhile, government spending rose by 0.3% q/q in Q2 (BarCap: 0.5%), while investment fell by 2.4% q/q (BarCap: -1.8%) with business investment falling by 1.6% q/q (consensus: 3.0%, BarCap: 2.0%). In the context of investment, it is worth bearing in mind that Q2's outturn follows a sharp rise in Q1 (+4.5% q/q), and would do little to change our expectation that investment will rise in 2010 as a whole.
 
Export growth of 1.1% q/q and import growth of 0.9% q/q meant that net trade made no material contribution to Q2 GDP growth. Remarkably, a sharp swing from de-stocking to re-stocking in Q2, meant that the change in inventories contributed 1.0pp to overall growth; this is the largest quarterly contribution inventories have made to growth since Q2 1994.

source: BarCap