According to official figures from the Office for National Statistics (ONS), the British economy returned to growth of 0.2% in August after two months of stagnation. This growth was in line with economists’ expectations, following 0% growth in June and July.
The ONS data showed the economy also grew by 0.2% over the three-month rolling period to August, and by 0.8% over the past year. Growth was driven by a 0.5% increase in industrial production and a 0.4% increase in the construction sector, both of which declined in July. The services sector, which makes up three-quarters of the UK economy, recorded a rise of 0.1% in August, similar to growth in July.
In particular, half of the fourteen subsectors of the service economy, including scientific, technical and professional services, saw growth in August.
After a strong recovery 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 forecast GDP growth of 0.3% to 0.4% for the last two quarters of the year, putting the annual growth rate between 1.2% and 1.3%, below the government’s G7 growth target . The US is expected to overtake the UK with an estimated growth of 2.6% in 2024.
“All major 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.
The return to growth in August followed the first rate cut in four years, with another rate cut expected in the coming months. Consumers have benefited from a decline in borrowing costs, mortgage rates and inflation, which fell to 2.2% in August and is expected to fall further to 1.9% in September, boosting real income growth for households.