Economic Growth Slowly Continues Recovery From Recession, Increases by 0.6 Percent
Earlier this week, official figures revealed that inflation had risen to 2.2 percent, marking the first increase of the year following a steady decline.
The economy has continued its recovery from the mild recession in the latter half of 2023, showing growth for a second consecutive quarter, according to official data.
Office for National Statistics (ONS) data published on Thursday indicated that gross domestic product (GDP) had increased by 0.6 percent between April and June, following a 0.7 percent growth in the first quarter of the year.
ONS Director of Economic Statistics Liz McKeown described the growth as robust, noting, “Growth across the three months was driven by the service sector, particularly in scientific research, IT, and legal services.”
McKeown added, “In June, growth was stagnant with a slight decline in the services sector, mainly due to weak performance in health, retail, and wholesale, balanced by widespread growth in manufacturing.”
Economists Split
The performance aligns with forecasts, but economists have differing views on the sustainability of this growth.
Sanjay Raja, UK chief economist at Deutsche Bank, suggested that while this growth may increase the overall economy’s size, “we shouldn’t expect the strong growth seen in the first half of 2024 to continue. We anticipate a slowdown.”
EY UK Chief Economist Peter Arnold expressed a slightly more positive viewpoint, stating, “The potential rebounds in health and retail output in July suggest that the third quarter should begin reasonably well.”
George Buckley, chief European economist at Nomura, believes that the Bank of England (BoE) will be content with the current economic growth, emphasizing the significance of GDP figures relative to inflation for central banks.
Economic Challenges
GDP serves as a measure of a country’s economic size by assessing economic activity across governments, industries, and households. Increased household spending and job creation by companies signify economic growth.
This solid growth in the second quarter should bode well for the new Labour government, which has prioritized economic growth to generate higher tax revenue for public spending purposes.
Inflation
The recent performance is following the publication of the Consumer Price Index figures on Wednesday, which revealed that inflation had risen to 2.2 percent in July, surpassing the BoE’s 2 percent target and marking the first increase this year after a period of decline.
Inflation remains lower than the peak during the cost of living crisis in 2022 and 2023, where it reached 11.1 percent in October 2022.
Economists anticipate that the Bank will maintain interest rates at the upcoming MPC meeting in September, considering a potential cut to 4.75 percent in November.
PA Media contributed to this report.
