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The UK economic system grew 0.2 per cent in August following two months of stagnation, helped by broad-based expansions in providers, manufacturing and development.
Friday’s determine, consistent with economists’ forecasts, got here after zero development in June and July however marked a slowdown from the beginning of the yr.
Providers output grew 0.1 per cent in August, manufacturing was up 0.5 per cent and development expanded 0.4 per cent, the Workplace for Nationwide Statistics stated.
Ashley Webb, economist at consultancy Capital Economics, stated the enlargement in August, after the economic system didn’t develop in three of the 4 earlier months, “lends some assist to our view {that a} delicate slowdown in GDP development within the second half of this yr is extra possible than one other recession”.
The ONS information comes lower than three weeks earlier than Labour’s first Price range, when chancellor Rachel Reeves faces the problem of lifting financial development whereas repairing the general public funds.
Prime Minister Sir Keir Starmer and Reeves have put development on the coronary heart of Labour’s agenda, however warned the general public in the summertime that the Price range on October 30 will embody “painful” selections.
Extra lately, the chancellor vowed to “make investments, make investments, make investments” as she ready to extend capital funding with the intention to increase infrastructure.
The ONS revised down development for Might and April, prompting Pantheon Macroeconomics to chop its development forecast for the third quarter to 0.2 per cent, from 0.3 per cent, which is 0.1 share level beneath the Financial institution of England’s forecast. GDP figures for the third quarter might be launched in November.
“Progress slowing beneath the MPC’s forecast leaves a [BoE] fee minimize in November as a racing certainty,” stated Rob Wooden, economist on the consultancy.
“However the UK’s enlargement nonetheless has additional to run,” he added, predicting that wage rises, low unemployment and decrease rates of interest would contribute to 0.4 per cent development within the ultimate quarter.
Reeves stated it was “welcome information that development has returned to the economic system”, including: “Rising the economic system is the primary precedence of this authorities so we are able to repair the NHS, rebuild Britain and make working folks higher off.”
Within the three months to August in contrast with the earlier three months, the economic system grew 0.2 per cent — a pointy slowdown from the 0.7 per cent enlargement within the three months to March and development of 0.5 per cent within the second quarter.
“All fundamental sectors of the economic system grew in August, however the broader image is one in every of slowing development in current months, in comparison with the primary half of the yr,” stated Liz McKeown, ONS director of financial statistics.
Figures from the company additionally confirmed that the products and providers commerce deficit, the hole between exports and imports, widened by £3bn to £10bn within the three months to August, due to elevated imports of products.
The economic system entered a technical recession on the finish of final yr, however returned to development initially of this yr as value pressures eased and mortgage charges fell.
Falling inflation prompted the BoE to chop rates of interest in August for the primary time in additional than 4 years. The central financial institution held its benchmark fee at 5 per cent final month however indicated it’d scale back borrowing prices once more on the subsequent assembly of the Financial Coverage Committee on November 7.
