The UK economy returned to growth in August, expanding by 0.2% after two months of stagnation, according to official figures from the Office for National Statistics (ONS). This growth was in line with economists’ expectations, following 0% growth recorded in June and July.
The ONS data showed that the economy also grew by 0.2% over a rolling three-month period to August and expanded by 0.8% over the past year. Growth was driven by a 0.5% increase in manufacturing production and a 0.4% rise in the construction sector, both of which had declined in July. The services sector, which constitutes three-quarters of the UK economy, recorded a 0.1% increase in August, matching its growth in July.
Notably, half of the 14 subsectors of the services economy, including scientific, technical, and professional services, experienced growth in August.
After a strong rebound at the start of the year, with 0.7% and 0.5% growth in the first and second quarters respectively, growth has cooled in recent months. Economists predict GDP expansion of 0.3% to 0.4% for the last two quarters of the year, bringing the annual growth rate to between 1.2% and 1.3%, below the government’s G7 growth target. The US is expected to outpace the UK with an estimated 2.6% growth in 2024.
“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,” said Liz McKeown, director of economic statistics at the ONS.
August’s return to growth followed the first interest rate cut in four years, with another rate reduction expected in the coming months. Consumers have benefited from a decline in borrowing costs, mortgage rates, and inflation, which dropped to 2.2% in August and is projected to fall further to 1.9% in September, boosting real income growth for households.
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UK economy returns to 0.2% growth in August after months of stagnation