"It has finally managed to pull itself out of its stagflation rut"
The UK’s economy has grown by 0.5% in June after a 0.1% fall in the previous month, the Office for National Statistics (ONS) has reported.
Quarterly gross domestic product (GDP) also saw a 0.2% growth from April to June, ONS data published on Friday revealed, as financial experts heaved a sigh of relief with the economy apparently avoiding stagflation.
A range of businesses cited the additional bank holiday in May as a reason for increased output in June, the main contributor to the increase in monthly GDP being production output, which grew by 1.8% following a 0.6% fall in the previous month. The construction sector also grew by 1.6%, following a fall of 0.3% in May.
According to the latest GDP monthly statistics, services output was also up 0.2% in June after showing no growth in May, while output in consumer-facing services grew by 0.5% following a 0.2% fall in the previous month.
GDP grew 0.5% in June and 0.2% across Quarter 2 (April to June) as a whole.
— Office for National Statistics (ONS) (@ONS) August 11, 2023
In June:
▪️ services grew 0.2%
▪️ production grew 1.8%
▪️ construction grew 1.6%
➡️ https://t.co/VTaiXALlxE pic.twitter.com/50uS2ifQc8
“The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June,” commented Darren Morgan, director of economic statistics at the Office for National Statistics. “Manufacturing saw a particularly strong month with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.
“Services also had a strong month with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action. Construction also grew strongly, as did pubs and restaurants, with both aided by the hot weather.
“Across the quarter as a whole, GDP grew a little with widespread growth across manufacturing – aided by falling raw material prices – computer programming and hospitality.”
John Choong, equity and markets analyst at Investing Reviews, said the UK economy has finally managed to pull itself out of its stagflation rut.
“GDP finally grew by more than 0.1% in Q2 and 0.5% in June, showing welcome signs of life,” he remarked. “That said, Britons should be wary as the better economic outlook could push the Bank of England to take a more hawkish approach in meetings to come.
“Good news could be bad news for borrowers. This could see mortgage rates reverse course, having seen some relief over the past weeks. Also, any potential GDP growth will be heavily challenged by strong headwinds from sky-high interest rates and high taxes.”
Jonathan Moyes, head of investment research at Wealth Club, warned that while the June GDP figures was much stronger than consensus forecasts, the UK “is by no means “out of the woods.”
“Forecasters have long predicted a recession that has yet to arrive,” Moyes said. “The economy may continue to find a way to muddle through. News of wage growth surpassing inflation for the second half of the year May provide the confidence the economy needs to avoid falling into recession.”
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