The UK economy saw growth in August following two stagnant months, as reported by the Office for National Statistics (ONS). In August, gross domestic product (GDP) increased by 0.2%, marking a positive change from zero growth in June and July. The figures align with economist forecasts and offer a boost for Chancellor Rachel Reeves ahead of the autumn Budget.
Liz McKeown, ONS director of economic statistics, noted that all major sectors of the economy experienced growth in August. Sectors such as accountancy, retail, and manufacturing performed well, with construction rebounding from a contraction in July. However, declines were observed in wholesaling and oil extraction.
The services sector was a key driver of growth, with a 0.1% rise in August after a similar increase in July. The production sector also rebounded, recording 0.5% growth following a 0.7% contraction in July. Construction output increased by 0.4% in August and by 1% in the three months leading up to August 2024.
Chancellor Rachel Reeves welcomed the news, emphasizing the government’s focus on economic growth to support key priorities such as healthcare, infrastructure development, and improving living standards. Discussions are ongoing regarding a potential rate cut at the next Bank of England meeting, with differing opinions among economists based on the recent GDP figures.
While the positive GDP data suggests a rate cut may still be forthcoming, some experts believe the recent growth could influence rate setters to delay any immediate policy adjustments. Business confidence surveys have shown a decline in September, coinciding with warnings of tough decisions in the upcoming Budget.
Looking ahead, analysts anticipate a potential slowdown in economic activity, partly driven by speculation surrounding the Budget. However, the recent growth in output has provided a positive outlook, fuelled by factors like reduced inflation and improved weather conditions that have boosted retail and manufacturing sectors.
As the economy continues to navigate challenges and opportunities, stakeholders are closely monitoring developments to gauge the trajectory of economic growth and policy responses.