UK Economy Experiences Slower Growth Than Anticipated During Spring

September 30, 2024 TruthUSA

The ONS now estimates that the economy expanded by 0.5 percent in the second quarter of 2024, a slight decrease from the previous estimate of 0.6 percent.

Britain’s economic growth was lower than previously thought in the spring months, but these revisions had minimal impact on the overall economic outlook for the past two years.

For the period between April and June, GDP rose by 0.5 percent, revised down from the initial estimate of 0.6 percent.

The Office for National Statistics (ONS) made use of additional data to revise the GDP figures. This included new annual survey data, VAT returns, and updated information on industry sizes for the first time.

“However, with these enhancements, the growth trend over the last 18 months remains largely unchanged,” said ONS Director of Economic Statistics Liz McKeown in a statement.

The weaker-than-expected growth follows a period of slow recovery from the technical recession that the UK entered at the end of the previous year. A technical recession is defined as two consecutive quarters of negative growth.

In the first quarter of the year, the UK bounced back from the shallow recession with a GDP increase of 0.7 percent. The UK economy demonstrated the fastest growth among the G7 nations in the first half of the year.

However, senior economist Simon Pittaway from the Resolution Foundation suggests that this positive trend might not last, with economic growth projected to slow down in the medium term. The latest data from the ONS indicated no growth in both June and July, indicating a lack of expansion in the economy.

In response, Chancellor Rachel Reeves acknowledged the significant challenge the UK faces after experiencing 14 years of low economic growth.

The ONS figures show that Britain’s recovery from recession was already losing momentum as the Labour government took office. Since assuming power, the government has focused on stabilizing the economy and fostering economic growth.

Despite the anticipated tax hikes and spending cuts in the upcoming October Budget, Labour has assured that these measures will not hinder economic growth.

The Office for Budget Responsibility has highlighted the need for a consistent revenue stream in order to reduce the current high levels of public sector debt and decrease government borrowing. Failure to achieve this could triple the national debt over the next five decades, the watchdog warned.

Sector Growth

The revised figures for the second quarter indicated a stronger services sector, with a 0.6 percent increase in output. However, this growth was partially offset by declines in production and construction.

Within the services sector, the largest growth contributions came from a 2.9 percent rise in information and communication activities, including computer programming and consultancy. Professional, scientific, and technical activities also saw a growth of 1.9 percent.

Conversely, the decline in consumer-facing services was primarily driven by decreases in real estate operations and wholesale and retail trade.

Production experienced a 0.3 percent decrease in the spring, down from the initial estimate of 0.1 percent, largely due to a decline in manufacturing. Anecdotal evidence suggests that this decline may be a result of factories reconfiguring for increased electric car production and temporary supply chain issues.

Construction saw a 0.2 percent decrease, revised from the initial 0.1 percent estimate. However, the sector showed growth in both May and June following the second quarter.

The ONS also revised the growth data for the entirety of 2023, reporting an increase of 0.3 percent from the initial 0.1 percent estimate, supported by stronger income data such as business profits and employee wages.

Although real households’ disposable income is projected to have grown at a slower rate than previously thought, the household saving ratio increased to 10.0 percent, up from 8.9 percent in the first quarter of the year.

“Our latest data indicates that household savings are continuing to rise and are now at their highest level since the Covid-19 lockdowns,” stated McKeown.

This increase was driven by rises in wages, social security benefits, and a decrease in total paid social contributions.

PA Media contributed to this report.

Source link