UK economy returns to growth ahead of annual budget
Economic output rises 0.2% month on month in August
BRITAIN’S economy grew in August after two consecutive months of no growth, something that will reassure finance minister Rachel Reeves ahead of the new Labour government’s first budget later this month.
Economic output rose by 0.2 per cent in monthly terms in August, according to figures from the Office for National Statistics (ONS) that were in line with expectations in a Reuters poll of economists.
“This will provide a timely boost for the chancellor amidst a backdrop of growing spending pressures,” said Yael Selfin, the chief economist at KPMG UK.
Reeves welcomed the news on Friday (Oct 11) and said that growing the economy was a top priority for the government.
Britain’s economy now looks on track for a third consecutive quarter of economic growth.
The ONS said data for September gross domestic product would need to show a month-on-month fall of 0.3 per cent to 0.6 per cent to generate a flat quarterly reading, assuming no revisions to existing figures.
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Sterling was little changed against the US dollar after Friday’s ONS figures were released. Investors added to their bets of a quarter-point rate cut by the Bank of England in November.
The ONS left unrevised its estimates for monthly gross domestic output for July and June, when the economy stagnated.
But it revised down its estimates for growth in April and May, which now show readings of -0.1 per cent and +0.2 per cent, compared with previous estimates of 0 per cent and +0.4 per cent.
The Bank of England expects economic growth to slow slightly to 0.4 per cent in the third quarter and 0.2 per cent in the final three months of the year – which it views as closer to the economy’s underlying growth rate.
Compared with a year ago, economic output was 1 per cent higher, below the 1.4 per cent growth forecast by economists, a miss that reflected downward revisions to past months.
Prime Minister Keir Starmer will host an international investment summit on Oct 14, aimed at boosting foreign direct investment to help improve economic growth – one of his main missions since coming to power in July.
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