The UK economy showed a modest recovery in August, growing by 0.2% after a period of stagnation.
- Manufacturing and construction sectors saw improvements, contributing significantly to this growth.
- Despite this progress, the broader economic environment reflects a slowdown compared to earlier in the year.
- Economists forecast further growth, albeit at a slower pace, in the final quarters of the year.
- Interest rate cuts have supported consumer spending, with inflation rates expected to continue to decline.
The UK’s economic performance in August marked a positive shift with a growth of 0.2%, following two months of stagnation. Key contributors to this upturn were the manufacturing and construction sectors, which experienced increases of 0.5% and 0.4% respectively. This growth follows declines in these sectors from the previous month.
The services sector, which is pivotal, representing three-quarters of the economy, improved by 0.1% in August, maintaining the same growth rate as in July. Notably, half of its subsectors, including scientific, technical, and professional services, saw advancement.
Growth throughout 2023 has been uneven, with a robust start of 0.7% and 0.5% growth in the first and second quarters, followed by a slowdown. Experts predict GDP growth of 0.3% to 0.4% for the remaining quarters, resulting in an annual growth rate between 1.2% and 1.3%, trailing behind the government’s G7 target. This is starkly contrasted by projections showing the US with a 2.6% growth in 2024.
Liz McKeown, the director of economic statistics at the ONS, notes that while all main sectors exhibited growth in August, an overall deceleration has been observed in recent months when compared to early 2023.
The economic context has been influenced by the first interest rate cut in four years, with another expected soon. This monetary policy shift has resulted in decreased borrowing costs and mortgage rates, boosting consumer confidence as inflation dropped to 2.2% in August and is anticipated to fall further to 1.9% in September.
Despite a modest recovery, the UK economy continues to face challenges as growth stabilises at a slower pace.
