David Cameron and George Osborne were handed a precious weapon against Labour's attacks on their economic policies on Thursday as it emerged that the recovery picked up pace between April and June.
Official figures showed the UK economy expanded by 0.6%, just months after some analysts predicted that the country was about to relapse into a new recession.
Mindful of the experience of the onetime Tory chancellor Norman Lamont, who spoke of the "green shoots of economic spring", Osborne used careful language about how the economy was now "on the mend".
But he was quick to claim the credit – and, in a direct challenge to his Labour shadow, Ed Balls, to insist that people up and down the country will soon share in the feelgood factor.
"Unlike the unbalanced economy before the crisis, we are going to make sure everyone benefits from this recovery," he said, after spending Wednesday night visiting shift workers in the Midlands. "Britain is holding its nerve, we are sticking to our plan, and the British economy is on the mend."
Balls, speaking from the United States, said stronger growth was "welcome and long overdue", but added that weak wage growth and above-target inflation meant living standards were still being squeezed. "While millionaires have been given a huge tax cut, for everyone else life is getting harder."
Ed Balls said stronger growth was 'welcome and long overdue', but added that living standards were still being squeezed. Photograph: Peter Macdiarmid/Getty Images The 0.6% quarterly rate of growth in gross domestic product was twice the pace recorded in the first three months of 2013, and exactly as predicted by economists, after signs of a pickup in retail sales and upbeat readings in business surveys.
The chancellor's allies believe the first two consecutive quarters of growth since 2011 – across most economic sectors – will raise questions for Balls, who warned in 2010 that Osborne's deficit reduction plan was "the equivalent of ripping out the foundations of the house just as the hurricane is about to hit".
Matt Hancock, the chancellor's former chief of staff who is now a business minister, told the Guardian: "The biggest problem for Balls is he said we shouldn't stick to the course and we should borrow more and spend more. But that is exactly what got us into the mess in the first place."
Labour embarked on a change of tack in fiscal policy last month when Balls said he would have to accept the government's spending plans for 2015-16 outlined by Osborne on 26 June. But Hancock said: "Their fiscal policy is in a mess. They have lost the argument but kept the policy."
Balls made careful plans for the GDP announcement in the full knowledge that the chancellor would hail the figures. The shadow chancellor spent the day in Washington where he launched an inclusive growth commission with Larry Summers, the former US treasury secretary, which will look at how Britain can achieve US levels of growth at all levels of the economy.
The Office for National Statistics said that all sectors of the economy recorded growth in the second quarter of the year. Both industrial production and the key services sector expanded by 0.6%, the ONS said, with construction – which has been a heavy drag on the economy in recent quarters – picking up by a healthier than expected 0.9%.
Chris Williamson, chief economist at City data provider Markit, said: "Prospects look good for a continuation of the recovery in the third quarter, with consumers and businesses both helping drive the upturn. There are even signs that exporters will see improved sales, helping drive the long-awaited re-balancing of the economy."
John Longworth, director-general of the British Chambers of Commerce, said his members had become more optimistic in recent months. "Firms are feeling upbeat and are capable of expanding. More and more are adopting a 'have a go' attitude when it comes to exporting, which is really encouraging as this will go a long way to driving growth further still."
The Treasury hopes that with the eurozone crisis in remission, the economy is now poised for a more solid recovery, after almost three years of flatlining.
Analysts believe part of the explanation for the UK turnaround has been the chancellor's deliberate attempt to stimulate the housing market through the Funding for Lending scheme, which has brought down the cost of mortgages, and his controversial Help to Buy measures. Help to Buy is providing interest-free loans for buyers of newly built homes, and from January people buying properties worth up to £600,000 will be offered taxpayer-backed mortgage guarantees.
Alan Clarke, UK economist at Scotiabank, said: "Much of the turnaround in the growth outlook has coincided with signs of a marked improvement in the housing market, coupled with better than expected construction data. Both are thanks to the government's Help to Buy scheme." But many consumers were dipping into savings to fund their , and the recovery will only be sustained into 2014 if their renewed confidence feeds through to rising wagesThe early indications are that this is merely prompting consumption growth in excess of income growth. spending. "This can only persist for a finite period – we cannot borrow growth for ever."
Richard Lloyd, executive director of the consumer group Which?, said its surveys suggested many people were still struggling. "Today's confirmation of further growth is welcome but there is still a long way to go before this will be felt by consumers, whose confidence and spending power remains fragile," he said. "Households are increasingly using savings or credit to pay for essentials."
Despite the upturn, the economy has not recovered the output lost in the deep recession of 2008-09: the ONS said GDP was still 3.3% below its pre-crisis peak.
Thursday's relatively firm growth figure will guide the Bank of England's thinking, as it prepares to decide whether to deliver renewed stimulus to the economy in August.
The new governor, Mark Carney, favours giving growth an extra fillip through so-called "forward guidance", which reassures financial markets and consumers that interest rates will remain low for a prolonged period; but other members of the Bank's monetary policy committee are known to be more sceptical.
However, Simon Wells, chief UK economist at HSBC, said he believed the monetary policy committee would still want to give the recovery an extra nudge.
"Real wages are falling, firms aren't investing and non-oil exports aren't growing. So the BoE won't take any chances and we still expect more explicit forward guidance next month. Despite moving up a gear, we haven't yet reached escape velocity."
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