In August, the UK economy experienced a modest growth rate of 0.2%, breaking a two-month stagnation period. This change was primarily driven by increases in manufacturing and construction, according to data from the Office for National Statistics (ONS).
- Manufacturing production saw a 0.5% rise, reversing declines seen in previous months, signaling a positive shift.
- The construction sector recorded a 0.4% increase, also bouncing back after previous downturns, contributing significantly to the overall economic growth.
- The services sector, pivotal to the UK economy, achieved a marginal growth of 0.1% in August, consistent with its performance in July, with half of its subsectors marking progress.
- Despite the growth observed, overall economic expansion remains slower in the latter part of the year compared to earlier quarters.
The UK economy’s growth of 0.2% in August marks a notable recovery from the lackluster performance observed in the previous months of the year. The recovery was significantly bolstered by the manufacturing sector, which experienced a 0.5% rise in production after declines in earlier months. This resurgence in manufacturing played a crucial role in lifting the overall economic activity.
Simultaneously, the construction sector contributed a 0.4% increase to the economy’s growth in August, representing a recovery from the sector’s setbacks in July. These improvements in manufacturing and construction demonstrate a vital resurgence in business activity within these industries.
Meanwhile, the services sector, which constitutes approximately three-quarters of the UK economy, demonstrated a modest growth of 0.1% in August. This growth was in alignment with the sector’s performance in July, although only half of the services sector’s 14 subsectors, including those in scientific, technical, and professional services, experienced noteworthy growth during this period.
Notably, after a strong performance earlier in the year, the overall pace of economic growth has decelerated in recent months. The economy enjoyed robust growth of 0.7% and 0.5% in the first and second quarters, respectively, but forecasts indicate a moderate GDP expansion of 0.3% to 0.4% for the remaining two quarters of the year. This would result in an annual growth rate of around 1.2% to 1.3%, falling short of the government’s targets compared to other G7 nations.
Economists foresee that the United States will likely outpace the UK with a projected growth of 2.6% in 2024. Liz McKeown, Director of Economic Statistics at the ONS, remarked that while all primary economic sectors saw growth in August, the general trend indicates slowing momentum relative to the first half of the year.
The recent economic upturn was influenced by favorable monetary policy outcomes, as August coincided with the first interest rate cut in four years. Consumers have benefitted from reduced borrowing and mortgage rates, along with a decline in inflation to 2.2% in August, which is expected to drop further to 1.9% in September, thus improving real income growth among households.
The UK’s modest growth in August signals a recovery phase, yet the economy still faces challenges to meet its annual growth expectations.
