Britain’s economy made a welcome return to growth in August after a pick up on the high street and in factories helped drive overall GDP.
Output was up by 0.2% in the month following two months of flatlining in June and July, according to latest figures from the Office for National Statistics (ONS).
In means that quarterly growth reached 0.2% over the three month period and the economy was 1% bigger than a year previously.
Although the growth was in line with City expectations and welcomed in Downing Street, a slowdown since the sprightly start to the year for the economy has set alarm bells ringing in the financial markets.
The ONS data showed that the dominant services sector grew by 0.1% in August with retail trade up 1% following the wet start to the summer and the interest rate cut early in the month.
The production sector, which includes manufacturing grew by 0.5%, while construction output was 0.4% higher.
Susannah Streeter, head of money and markets, at investment managers Hargreaves Lansdown said: “While this was a brighter end to the summer, the overall picture is of the economy slowing in the second half of the year. This is increasing bets for another interest rate cut in November.
“The financial markets are now pricing in around an 80 % chance of another reduction next month, compared to 70% before the GDP figures were released.’’
ONS Director of Economic Statistics Liz McKeown said: “Allmain sectors of the economy grew in August, but the broader picture is one ofslowing growth in recent months, compared to the first half of the year.
“In August accountancy, retail and many manufacturers had strong months, while construction also recovered from July’s contraction. These were partially offset by falls in wholesaling and oil extraction.” Chancellor of the Exchequer, Rachel Reeves, who is preparing her first Budget on 30 October, said: “It's welcome news that growth has returned to the economy. Growing the economy is the number one priority of this Government so we can fix the NHS, rebuild Britain, and make working people better off. “While change will not happen overnight, we are not wasting any time on delivering on the promise of change.Next week hundreds of the world’s biggest businesses will come to Britain asthe we deliver on our promise to bring investment, growth, and jobs back toevery part of the country.”
However, the goods and services trade deficit widened by £3 billion to £10 billion in the three months to August 2024
The trade in goods deficit widened by £2.6 billion to £52.4 billion in the threemonths to August 2024, while the trade in services surplus is estimated to havenarrowed by £0.4 billion to £42.4 billion.
Samuel Edwards, Head of Dealing at financial services firm Ebury, said: “This morning’s data will put a spring in the step of the Chancellor Rachel Reeves in what is one of the last pieces of major macroeconomic news ahead of the much-anticipatedAutumn Budget.
“However, whilst the UK economy has made an impressiverebound in the last year, particularly compared to the Eurozone, the country’swidening trade deficit should be sounding alarm bells to the new administration.
“Exports in goods continue to dwindle well below historic levels amid domestic and international obstacles harming exporters’ bottom lines.
“International conflicts, post-Brexit regulatory challenges and high interest rates continue to stifle growth and production in this valuable sector.”
