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The UK economic system grew 0.6 per cent within the second quarter, in solely a marginal slowdown from the strong development of the earlier three months, offering some excellent news for the brand new Labour authorities.
The quarter-on-quarter change within the GDP determine from the Workplace for Nationwide Statistics on Thursday in contrast with 0.7 per cent development within the first three months of the yr and was in keeping with economists’ expectations.
Month-to-month GDP development was zero in June following a 0.4 per cent growth in Could, the ONS mentioned. The determine was in keeping with analysts’ expectations.
Hailey Low, economist on the Nationwide Institute of Financial and Social Analysis, mentioned the GDP figures “sign that development stays on the right track, constructing on Q1’s sturdy efficiency”.
However she added: “Persistent challenges reminiscent of low productiveness development, strained public funds and insufficient infrastructures have acted as boundaries to reaching sustained development.”
Prime Minister Sir Keir Starmer has positioned development on the centre of his financial agenda, promising to “take the brakes off Britain”.
Responding to the GDP information, chancellor Rachel Reeves mentioned the federal government was “underneath no phantasm as to the dimensions of the problem we’ve inherited after greater than a decade of low financial development”.
Reeves argues that except she will be able to increase Britain’s long-term development price, the nation can be trapped in a “doom loop” of excessive taxes and poor public providers.
However Jeremy Hunt, former Conservative chancellor, mentioned: “As we speak’s figures are but additional proof that Labour have inherited a rising and resilient economic system.”
“The chancellor’s try and blame her financial inheritance on her resolution to boost taxes — one thing she had at all times deliberate — won’t wash with the general public.”
Sterling nudged larger following the ONS launch. The pound climbed 0.2 per cent in opposition to the US greenback to $1.285.
The yield on the curiosity rate-sensitive two-year gilt rose 0.03 share factors to three.58 per cent.
Ashley Webb, economist at consultancy Capital Economics, famous that the 0.6 per cent determine was marginally decrease than the 0.7 per cent forecast by the Financial institution of England.
“On the margin, this will give the financial institution a little bit of reassurance that the latest power of exercise received’t stop additional falls in providers inflation,” he added.
Separate ONS information revealed on Wednesday confirmed providers inflation, a vital gauge of home worth pressures within the eyes of curiosity rate-setters, fell greater than anticipated to five.2 per cent in July from 5.7 per cent in June.
The UK economic system entered a technical recession on the finish of final yr after being hit by excessive inflation and borrowing prices. Nonetheless, it returned to development this yr, helped by stronger family spending as worth pressures and mortgage charges declined.
In August, the BoE upgraded its GDP development forecast for this yr to 1.25 per cent from simply 0.5 per cent owing to stronger-than-expected exercise within the first half of the yr.
It expects quarterly GDP development to fall again to 0.4 per cent and 0.2 per cent within the third and fourth quarters, respectively.
Suren Thiru, economics director on the ICAEW skilled physique, mentioned: “This present tempo of financial development is unlikely to be maintained within the second half of the yr as weaker wage development, excessive rates of interest and chronic provide constraints limits output.”
Providers grew 0.8 per cent within the three months to June, with widespread offsetting falls of 0.1 per cent within the manufacturing and building sectors.
GDP per head, which issues for dwelling requirements, posted the second consecutive quarterly growth, but it surely stays under the extent of the identical quarter final yr following seven quarters of contraction.
Within the second quarter, there have been will increase in gross capital formation, authorities consumption and family spending, partially offset by falls in web commerce.
In June development was flat, pushed by a fall in providers owing to a weak month for well being, retailing and wholesaling. The well being sector was affected by the junior medical doctors’ strike, whereas moist climate hit gross sales.
The UK’s GDP quarter-on-quarter determine for the three months to June compares with a 0.3 per cent growth within the Eurozone and 0.7 per cent development within the US.
