But broader picture shows slowing momentum
The UK economy grew by 0.2% in August, following two months of flat growth, according to new data from the Office for National Statistics (ONS).
The ONS also reported that real gross domestic product (GDP) also increased by 0.2% in the three months to August 2024, compared to the previous three-month period ending in May 2024.
The services sector, which makes up a significant portion of the UK economy, saw output rise by 0.1% in August, maintaining the same growth rate as July. Over the three-month period to August, services also grew by 0.1%.
Production output rose by 0.5% in August, rebounding from a revised decline of 0.7% in July. However, production showed no growth over the three months to August.
Construction output increased by 0.4% in August, following a 0.4% contraction in July. Over the three months to August, the construction sector expanded by 1%.
GDP grew 0.2% in August 2024 and 0.2% in the 3 months to August 2024
— Office for National Statistics (ONS) (@ONS) October 11, 2024
In August, services grew 0.1%, production grew 0.5% and construction grew 0.4%.
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“All main sectors of the economy grew in August, but the broader picture is one of slowing growth in recent months, compared to the first half of the year,” said Liz McKeown, ONS director of economic statistics, commenting on the latest GDP figures.
“In August, accountancy, retail and many manufacturers had strong months, while construction also recovered from July’s contraction. These were partially offset by falls in wholesaling and oil extraction.”
According to Nicholas Hyett, investment manager at Wealth Club, August’s GDP growth “was broad based, with British brains and British brawn both contributing to healthy growth.”
“This is all welcome news for the Treasury ahead of the budget, which is expected to see taxes rise, potentially slowing economic activity,” Hyett said.
“It does raise a conundrum for the Bank of England though. The bank had been eyeing up further interest rate cuts, but the economy doesn’t look like it’s crying out for more monetary support, and with inflation expected to accelerate again into Christmas, rate setters might be thinking it makes sense to sit on their hands a little while longer.”
The Bank of England forecasts that economic growth will slow to 0.4% in the third quarter and 0.2% in the final quarter of 2024. An improving economy and easing inflation over recent months allowed the central bank to cut interest rates for the first time since 2020, lowering the base rate by 0.25 percentage points to 5% in August. While inflation rose to 2.2% in July and remained steady in August, additional rate cuts are expected before year-end.
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