In August, the UK economy saw a return to growth with a 0.2% increase after a stagnant period.
- Manufacturing and construction sectors were key drivers of this economic growth.
- The services sector also contributed but at a slower rate compared to earlier in the year.
- There is an expectation of continued modest growth for the remainder of the year.
- Interest rate cuts and reduced inflation have positively impacted consumer borrowing and spending.
The UK economy demonstrated a modest recovery in August, recording a 0.2% growth according to the latest figures from the Office for National Statistics (ONS). This growth follows a period of stagnation, offering a positive outlook for the coming months.
Driven primarily by a 0.5% upsurge in manufacturing production and a 0.4% increase in the construction sector, the growth marked a reversal of the declines these sectors experienced in July. The contribution of manufacturing and construction has been critical in revitalising the economy’s performance.
The services sector, which constitutes around three-quarters of the UK’s economic activity, recorded a minimal increase of 0.1% in August, consistent with its performance in July. Half of the service subsectors, including those in scientific and technical fields, witnessed growth, albeit limited. This indicates an uneven recovery within the services domain.
After a strong start to the year, with growth rates of 0.7% and 0.5% in the first and second quarters respectively, the UK economy has slowed down in recent months. Current predictions by economists suggest a GDP growth of between 0.3% to 0.4% for the final quarters of the year, resulting in an annual growth rate projected at 1.2% to 1.3%, which falls below the government’s G7 target growth rate.
In comparison, the United States is estimated to achieve a higher growth rate of 2.6% in 2024, placing additional pressure on the UK’s economic performance.
Liz McKeown, Director of Economic Statistics at the ONS, commented, “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.”
The August growth figures coincided with the first interest rate cut in four years, with expectations of further reductions. This monetary easing has reduced borrowing costs and mortgage rates, alongside a drop in inflation to 2.2% in August, providing relief to consumers by increasing real income growth.
Further reductions in inflation are anticipated, potentially reaching 1.9% in September, thereby sustaining the positive momentum in household spending power.
The UK economy’s slight growth in August signals a gradual recovery, yet future challenges remain amid international comparisons.
