The UK’s economy experienced a growth of 0.2% in August, as per official statistics.
This nominal increase in gross domestic product (GDP) – a measure of a nation’s entire output – follows two previous months of stasis.
The data, provided by the Office for National Statistics (ONS), matched economists’ predictions.
Liz McKeown, representing the ONS, commented: “All principal sectors of the economy expanded in August, although the overall trend indicates a deceleration in growth compared to the initial half of the year.”
She further remarked: “In August, accounting, retail, and a number of manufacturing sectors had robust performances, while construction rebounded from the decline in July. These gains were somewhat counterbalanced by downturns in wholesaling and petroleum extraction.”
The ONS estimated that the economy also expanded by 0.2% over the three-month period leading to August.
Timely Return to Growth
The return to a 0.2% growth in August following two months of stagnation, although modest, confirms the expected slowdown in the latter half of this year; nonetheless, it is appreciated primarily due to its timing.
The chancellor and prime minister are set to receive several hundred international investors at an Investment Summit in London on Monday, a gathering that will unite CEOs from private firms, investment organizations, and sovereign wealth funds for 48 hours of persuasive discussions on the benefits of the UK, complemented by receptions and royal engagement.
This event is considered crucial because if the new administration intends to fulfill its promises to accelerate growth through a comprehensive national infrastructure revamp, the UK must seek external assistance. Influx of foreign capital is essential, hence showcasing any signs of life in the sluggish economy is beneficial, however marginally.
Rachel Reeves acknowledged this in her immediate reaction to the statistics, notably expressing satisfaction at the growth, while not emphasizing, as she has since her entry into No 11, the precarious nature of the public finances she took over.
If gallows humor were acceptable in the Treasury, one might say that less than three weeks ahead of her inaugural budget, it is already spurring growth, thanks to measures taken to mitigate its fallout. The Office for National Statistics reveals today that professional services, including accounting, surged by 4.3% in August.
Chancellor Rachel Reeves praised the figures, which coincide with the government getting ready to host an international investment summit next week, calling it “encouraging news”.
She stated: “Expanding the economy is the top priority for this government to rectify the NHS, restore Britain, and improve the living standards of working citizens.”
“While transformations won’t occur overnight, we are not delaying any effort to fulfill the promise of change.”
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The services sector was the primary driver of growth, increasing by 0.1% in August after a comparable rise in July.
Officials confirmed that there were no modifications to previous assessments of no growth in both June and July.
Analysts also discovered that the UK’s total underlying trade shortfall expanded by £3bn to £10bn in the three months leading to August 2024, prompted by a rise in goods imports.
Economist Ashley Webb from Capital Economics commented that the GDP figure for August “supports our perspective that a gradual slowdown in growth in the latter half of this year is more likely than facing another recession”.
This comes ahead of the Bank of England’s impending decision regarding interest rates in November. Financial markets have assigned an 80% probability of a reduction, according to the latest figures from Friday.
Suren Thiru, director of economics at the Institute of Chartered Accountants, remarked: “While interest rates are still expected to decrease in November, these promising figures imply that it’s not entirely certain, as they provide enough encouragement to the more hawkish rate setters regarding economic conditions to deter them from advocating policy relaxation.”
