The UK economy returned to growth in August, expanding by 0.2% after two months of recession, according to official figures from the Office for National Statistics (ONS). This growth was in line with economists’ expectations, after 0% growth recorded in June and July.
The economy also grew by 0.2% over the three-month period to August and expanded by 0.8% over the past year, Office for National Statistics data showed. The growth was driven by a 0.5% increase in manufacturing output and a 0.4% rise in the construction sector, both of which fell in July. The services sector, which makes up three-quarters of the UK economy, recorded a 0.1% increase in August, which is in line with its growth in July.
Notably, half of the 14 subsectors of the service economy, including scientific, technical and professional services, saw growth in August.
After a strong rebound at the start of the year, with growth of 0.7% and 0.5% in the first and second quarters respectively, growth has slowed in recent months. Economists expect GDP to expand by 0.3% to 0.4% during the last two quarters of the year, bringing the annual growth rate to between 1.2% and 1.3%, which is less than the growth target set by the government for the G7. The United States is expected to overtake the United Kingdom with growth estimated at 2.6% in 2024.
Liz McKeown, director of economic statistics at the ONS, said: “All major sectors of the economy grew in August, but the broader picture is one of slower growth in recent months, compared to the first half of the year.”
The return to growth in August followed the first interest rate cut in four years, and another rate cut is expected in the coming months. Consumers benefited from lower borrowing costs, mortgage interest rates, and inflation, which fell to 2.2% in August and is expected to fall further to 1.9% in September, boosting real household income growth.
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