- GDP grew 0.2% in August
- The economy shrank by a revised 0.6% in July
- Consumer facing services still 4.3% below pre-Covid levels
Danni Hewson, head of financial analysis at AJ Bell, comments on the latest UK GDP figures:
“On the one hand 0.2% could be considered the Goldilocks of GDP growth. Not too hot to suggest the Bank of England has more work to do to slow down the economy, not too cold to suggest its measures have completely stalled the engine.
“And the fact that August stormed back from July’s damp and dismal decline is testament to the resilience of the UK economy.
“The service sector, particularly education, engineers and architectural and legal firms, delivered the biggest growth drivers.
“But August is notable for its normalcy. The weather was pretty mediocre, the school holidays meant the impact of industrial action was relatively limited, and parents that had money to spend were prepared to spend it to keep their kids occupied.
“That said, the consumer facing part of the service sector still struggled. Cash strapped households had to make choices about which activities they would splash out on whilst keeping a weather eye on budgets.
“The previous month’s washout pushed people to spend on indoor activities like the cinema, so even a grey day provided families with an opportunity to do stuff for free on playing fields and in parks.
“The length of the cost-of-living crisis has decimated savings and forced people to think carefully about every penny they spend, and that’s crystal clear when you compare where the sector was before the pandemic and where it is now.
“Manufacturing and construction remained subdued even as some cost pressures begin to ebb away. For the latter sector it seems the weather was still causing problems, with delays to planned work as whatever summer sun glinted through the gloom failed to do much to boost temperatures.
“But despite August’s growth, July’s contraction was worse than had been thought and the disruption from rail strikes in September is already making economists concerned about the next set of figures.
“There’s been a lot of talk of recession and with growth so slim it’s beginning to feel almost inevitable. The full extent of increased borrowing costs has yet to be felt and as temperatures cool and thermostats are eyed warily there’s a real sense that economic resilience is fraying.”
