The UK sees economic growth bottom in the second quarter, but signs of strength remain

The UK economy grew more slowly than previously thought in the second quarter, but there were positive signs in household finances and business investment, which could encourage Finance Minister Rachel Reeves as she prepares next month’s Budget .

Economic output grew 0.5% in the April-June period, the Office for National Statistics said on Monday.

The figure is slightly lower than the preliminary estimate of 0.6% growth in gross domestic product. Economists consulted by Reuters expect growth of 0.6% to be confirmed.

The household savings rate increased from 8.9% to 10.0% in the first three months of 2024.

Investec economist Sandra Horsfield said savings data, above-inflation wage growth and a still strong jobs market meant households were likely to remain confident about future income prospects.

“In other words, there’s enough fuel in the tank to keep consumer spending high even if the momentum from above-inflation wage gains wanes,” Horsfield said.

Gross Domestic Product per capita increased for the second consecutive quarter, albeit more slowly than in the first quarter.

Prime Minister Keir Starmer, whose Labor Party won power in July, is trying to accelerate economic growth.

Reeves has suggested that some taxes will be increased in his first budget on October 30. Recent polls have shown declining consumer and business confidence, partly due to budget concerns.

But he also hinted that he could loosen rules on government debt, paving the way for more borrowing, which could boost investment and the broader economy.

The Bank of England expects economic growth to slow to 0.3% in the third quarter, but said the interest rate cut in August and expectations of further reductions, as well as lower inflation, will likely boost growth by end of the year.

Source: Terra

Rose

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