Key Takeaways:
- The UK economy expanded by 0.2% in the second quarter of 2023.
- The growth is unexpected, as economists predicted a stagnant performance.
- However, despite the growth, the UK economy is still not in danger.
YEREVAN (CoinChapter.com) — Official data released on August 11 indicates that the UK economy expanded by 0.2% in the year’s second quarter. According to the Office for National Statistics (ONS), the GDP upturn exceeded previous predictions of zero growth.
The country’s economy experienced a 0.5% growth in June alone, rebounding from a 0.1% decline in the previous month. In April this year, the county’s economy registered a modest 0.2% expansion.
This latest projection follows the unexpected 0.1% GDP growth experienced in the first quarter (January to March). The ONS report is expected to bring a sense of relief to financial experts. Economic performance in the previous months had raised concerns about potential stagflation within the economy.
The reasons behind UK’s GDP growth
Officials at the Office for National Statistics attribute the perceived “growth to the relatively fewer holidays in June than the previous month.
Banks in the UK remained shut for 3 Mondays, hampering the growth. These were on the Early May bank holiday on May 1, the Bank holiday for the coronation of King Charles III on May 8, and the Spring bank holiday on May 29.
These events caused a 0.1% decline in GDP growth in May. Moreover, the warm weather was another factor contributing to the positive economic upsurge in the country.
“The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June. Manufacturing saw a particularly strong month, with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth. Services also had a strong month, with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action,”
Darren Morgan, director of economic statistics of the ONS, said.
Notably, the primary driver of the monthly GDP growth was the growth in production output, which saw a 1.8% rise following a 0.6% decrease in the previous month. The construction sector also demonstrated positive growth of 1.6%, rebounding from a 0.3% decline in May.
The most recent monthly GDP statistics revealed that services output experienced a 0.2% uptick in June, significantly improving from its stagnant performance in May. Additionally, output in consumer-facing services grew by 0.5%, recuperating from a 0.2% fall in the preceding month.
All is not over for the UK economy just yet
While the recent report is positive news, the celebrations may not last. Some economists warn that an economic downturn could come soon.
Like other countries in the Group of Seven (G7), the UK economy has not recovered from the Covid-19 shock. According to the latest Bank of England Monetary Policy Report, GDP growth will remain weak through 2024.
“GDP growth is expected to remain below pre-pandemic rates in the medium term, also reflecting relatively weak potential supply and a waning boost from fiscal policy. Relative to the May projection, quarterly GDP growth is expected to be weaker throughout much of the forecast period, particularly during 2024 and at the beginning of 2025,”
the report reads.
However, Jeremy Hunt, the Chancellor of the Exchequer in Rishi Sunak’s cabinet, is positive. In a recent Twitter post, he called the slowdown “a rough patch,” promising fast growth in the coming months.
Meanwhile, inflation remains at 7.9%, according to June data. This is way above the Central Bank’s 2% target. As the winter months approach, economists will watch to see how the UK economy pulls off, avoiding the possible recession that still looms.
