In August after a dramatic drop in July, the British economy exhibited signs of a partial recovery, though the overall growth trajectory remained modest. This follows a year marked by high inflation and a series of interest rate hikes by the Bank of England.
Official statistics have revealed that the UK's economic activity increased by 0.2% in August compared to July, aligning with the average forecast among economists polled by Reuters.
That being said, the decline experienced in July was more pronounced than initially anticipated, with a reading of -0.6% rather than the initial projection of -0.5%. This drop was primarily attributed to rainy weather conditions and labor strikes, which had a negative impact on the economy.
The International Monetary Fund anticipates the UK to demonstrate the slowest growth among G7 nations in 2024. These indications of a deceleration persuaded the Bank of England to step back from pursuing further interest rate hikes in the previous month.
That said, the growth observed in August has diminished the likelihood of a recession that commenced in July and extended into September. To avert a contraction in the third quarter, the economy would need to expand by 0.2% in September, without accounting for other contributing factors.
In addition, the data also revealed that the UK's services sector outperformed expectations, posting a 0.4% growth in August compared to July. Meanwhile, the manufacturing and construction sectors witnessed contractions of 0.8% and 0.5%, respectively.
The economy expanded by 0.3% during the three months leading up to August, although this performance is viewed as rather modest. The recovery has seen contributions from automobile production, sales, and the construction sector.
Investors currently assess that there is less than a 25% chance of the Bank of England implementing an interest rate increase after its upcoming meeting in November.
According to the research released earlier, the property market experienced a decline in September due to elevated borrowing costs. However, the absence of further rate hikes by the Bank of England has rekindled hopes for a potential sales recovery in the coming year.
The Office for National Statistics (ONS) reports that the British economy has expanded by 2.1% when compared to February 2020, the period just before the onset of the coronavirus pandemic. The agency has recently revised its evaluation of the UK's economic rebound from the pandemic, positioning it as a mid-tier performer among its global counterparts, rather than trailing behind.
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