UK Economy Posts Modest Rebound in August Driven by Services

Gross domestic product rose 0.2% following a revised 0.6% contraction in July, the Office for National Statistics said Thursday. Economists had expected growth of 0.2%.

Doubts remain over the third quarter as a whole, with the BOE predicting growth of just 0.1% in the period. For a flat third quarter, GDP will need to rise at least 0.21% in September. The pound held gains after the data and was headed for a seventh day of advances, the longest winning streak since July 2020.

The ONS said the rise in services output was driven by the legal sector, architecture and engineering, and education, which returned to growth after two days of strikes by teachers in July. Health care also contributed to growth, with fewer doctors on strike than in the previous month. However, output in consumer-facing services slipped by 0.6%, leaving it still well below pre-Covid levels. Sports and recreation activities underpinned the weakness.

“The outlook for the economy remains lacklustre as high interest rates continue to bite,” said Yael Selfin, chief economist at KPMG UK. “Today’s data are consistent with our assessment that the economy entered a broad-based slowdown in late summer which has deteriorated further in recent months.”Money markets show the chance of another BOE rate increase in the coming months is little more than 50-50.

Source: Financial Digest (financialdigest.net)

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