Key takeaways
- The British economy registered modest growth of 0.2 percent in August, snapping two consecutive months of recession.
- The services sector played a major role in August’s growth with an increase of 0.1 percent, while notable sectors such as accounting, retail, manufacturing and construction were strong.
- The general economic picture indicates a slowdown in growth compared to the strong performance in the first half of the year.
The British economy grew modestly by 0.2 percent in August, after two consecutive months of recession. This increase in GDP, a measure of a country’s total domestic product, is in line with economists’ expectations and is due to growth in all major sectors.
Despite strong performances by prominent sectors such as accounting, retail, manufacturing and construction, gains were partially offset by declines in wholesale trade and oil extraction. However, the overall economic picture indicates a slowdown in growth compared to the strong performance in the first half of the year.
Government response
In the three months leading up to August, the economy also showed growth of 0.2%. British Treasury Secretary Rachel Reeves expressed her optimism about these numbers, especially as the government prepares to hold an international investment summit next week.
- She stressed that economic growth is of paramount importance in addressing pressing issues such as the national health care system, national reconstruction efforts and improving working conditions.
- Reeves believes that this is the first sign of the change promised by the new British government, but “change does not happen overnight,” as she puts it.
The services sector played a major role in growth in August, growing by 0.1 percent after a similar increase in July. There were no revisions to previous estimates of zero growth in June or July. The data also revealed an increase in the UK’s underlying trade deficit of £3 billion to £10 billion (€3.6 billion to €11.9 billion) over the three months to August 2024, mainly due to a sharp increase in imported goods.
Expert analysis
Economists are cautiously optimistic about these developments. suggests Ashley Webb of Capital Economics Sky News Although growth may weaken in the second half of the year, a complete recession seems less likely. This positive outlook coincides with expectations regarding the Bank of England’s upcoming interest rate decision in November, with financial markets anticipating an 80% chance of a rate cut.
However, Suren Thero, director of economics at the Institute of Chartered Accountants, stresses that these figures could influence the Bank of England’s decision and may provide enough incentive for some members to maintain current interest rates.
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