The UK economy grew by 0.6% in the second quarter of this year, continuing the country’s cautious recovery from recession, the Office for National Statistics said.
The figure was in line with expectations of economists polled by Reuters and followed 0.7% growth in the first quarter.
Economic growth was unchanged in June, in line with a Reuters poll, as activity in the UK’s dominant services sector fell 0.1%. Construction and manufacturing output rose 0.5% and 0.8% respectively in the month.
The UK economy has recorded modest but steady growth almost every month this year as the UK emerged from a mild recession. GDP also flattened in April, as wet weather dented retail sales and construction output.
On an annual basis, the economy grew 0.9% in the second quarter, compared with forecasts for 0.8%.
“These figures confirm that the UK’s recovery from recession accelerated in the second quarter, despite strikes and wet weather causing business activity to slow in June,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in a note.
“The UK’s strong Q2 growth was largely driven by temporary momentum from the recent sharp fall in inflation and a boost to consumer spending from events such as Euro 2024 rather than a meaningful improvement in the UK’s underlying growth trajectory,” Thiru added.
Thiru added that the growth rate is unlikely to continue in the second half of the year due to weaker wage growth, high interest rates and supply challenges.
UK inflation rises to 2.2% in JulyThe figure was slightly below the consensus forecast of 2.3%, the ONS data showed on Wednesday. The headline figure had been at the Bank of England’s 2% target rate for the previous two months, helping to spur the central bank’s decision. 25 basis point interest rate cut in early August.
The July figures are described by analysts favor continued monetary easing for the rest of the year, despite persistent service inflation.
In the April-June period, UK wage growth excluding bonuses fell to a two-year low, but remained relatively strong at 5.4%.
Richard Carter, head of fixed-rate research at Quilter Cheviot, said lower interest rates would “help stimulate further economic growth by making it easier for households and businesses to borrow” in the coming months — but noted it would take time for the impact to be felt.
The pound edged up after the GDP report on Thursday and was up 0.1% against the US dollar and 0.2% against the euro as of 7:35 a.m. in London.
Organizations included International Monetary Fundinvestment banking Goldman Sachs and Bank of England have both increased their growth forecasts for the UK economy in recent months. The IMF now forecasts growth of 0.7% this year, up from 0.5% previously.
Factors cited include a decline in inflation and reforms to planning and business rules planned by the new Labour government, which took office in July. Prime Minister Keir Starmer and Chancellor of the Exchequer Rachel Reeves have repeatedly stated that boosting economic growth will be a cornerstone of their policymaking, aiming for the UK to achieve the fastest GDP per capita growth of any Group of Seven nation.
“The new government is under no illusions about the scale of the challenge we inherit after more than a decade of low economic growth and a £22bn deficit in the public finances,” Reeves said in a statement on Thursday.
The Labor Party is expected to announce its first budget on October 30. Analysts say the announcement will provide more clarity on the government’s financial strategy and plans for changes to tax and public spending.
“Therefore, it is unlikely that we will see a significant acceleration in GDP growth in the short term,” said Richard Carter of Quilter Cheviot.
“For now, the economy is expected to continue growing at a relatively moderate pace, supported by wage growth above inflation and recent monetary easing,” he added.
