The economy of the United Kingdom showed growth in the second quarter of the current year.
Currently, the mentioned country is experiencing what, according to many experts and analysts, can be described as a process of cautious recovery after a period of recession. From April to June, the UK economy grew by 0.6% relative to the result for the previous period of the same duration. The Office for National Statistics released the relevant information last Thursday, August 15.
It is worth noting that the indicator of economic growth in the United Kingdom for April-June of the current year coincided with the preliminary expectations of analysts interviewed by the media. In the first quarter of 2024, the corresponding indicator increased by 0.7%.
Analysts interviewed by the media also say that currently, the state of affairs in the service sector is a sensitive factor affecting the dynamic of the economic growth in the United Kingdom. In this area of commercial activity, a 0.1% drop in internal financial volume in the form of earnings was recorded in June. At the same time, in the mentioned month in the United Kingdom, construction and production output showed an increase of 0.5% and 0.8%, respectively.
The current year has been positive for the UK economic system so far. Indicators of rapid growth are not recorded, but this fact is not a reflection of a critical state of affairs or a situation of gradual approach to collapse. There is a steady upward trajectory in the space of the United Kingdom’s economic system. In the current year, the tendency of growth is recorded in this system almost every month. The United Kingdom is gradually moving away from the period of recession, which in this case was not high or critical in terms of the impact on the economy and its prospects. In April, the gross domestic product (GDP) of the UK did not change. The reason for this state of affairs was the wet weather, which reduced retail sales and construction output.
On an annual basis, the economy of the United Kingdom in the second quarter of 2024 showed growth of 0.9%. It is worth noting that analysts interviewed by the media predicted that this indicator would increase by 0.8%. In this case, the reality turned out to be better than expectations, which does not happen very often in life.
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in a note that last quarter’s data confirm that the recovery of the United Kingdom’s economic system after a period of recession accelerated, despite strikes and wet weather, which caused the dynamic of the activity to show no changes in June. The expert also underlined that the indicators of the second quarter are largely due to the temporary momentum associated with a slowdown in the inflationary process and an increase in consumer spending regarding to events such as Euro 2024.
Suren Thiru suggests that the pace of the rising economy in the second half of the current year is likely not to continue. The expert cites such factors as weak wage growth, supply challenges, and high borrowing costs as the reasons for this forecast.
Inflation in the United Kingdom in July was fixed at 2.2%. The relevant information was published by the Office for National Statistics. It is worth noting that the analysts surveyed by the media predicted that the mentioned figures in July would be fixed at 2.3%.
In August, the Bank of England lowered the cost of borrowing from 5.25% to 5%. The July data on the dynamic of the economic growth in the United Kingdom can be described as favorable for continued easing of the monetary policy of the local financial regulator in the current year. The steady rising inflation in the UK services sector, according to experts interviewed by the media, is not an obstacle to making corresponding decisions and their subsequent implementation.
From April to June 2024 in the United Kingdom, wage growth excluding bonuses remained relatively high and was recorded at 5.4%. At the same time, this indicator is lowest compared to the results over the past two years.
Richard Carter, head of fixed interest research at Quilter Cheviot, says that cutting interest rates should boost economic growth. The expert notes that the easing of monetary policy implies an increase in the availability of borrowing for households and businesses. At the same time, Richard Carter underlined that it takes time to materialize the effect of the mentioned actions of the financial regulator.
After Thursday’s data on the growth of the United Kingdom’s economy were released, the pound sterling rose by 0.25% against the dollar and by 0.2% against the euro.
It is worth noting that in recent months, experts from many organizations have revised their forecasts regarding the prospects for the UK economy in 2024. For example, analysts at the International Monetary Fund expect economic growth in the United Kingdom to be 0.7% this year. The previous version of their forecast provided that the corresponding indicator would be fixed at 0.5%.
Currently, the United Kingdom’s economic system is in the territory of impact from factors such as slowing inflation and reforms to planning and business rules announced by the new Labour government, which won elections last month. UK Prime Minister Keir Starmer and Finance Minister Rachel Reeves have repeatedly said that stimulating economic growth will be the bedrock of their policymaking. They also aim to ensure that the United Kingdom achieves the fastest GDP per capita growth among the G7 countries. At the same time, Richard Carter says that a significant acceleration of the rise of the mentioned indicator in the short term is unlikely. According to the expert, the UK economy will continue to be within the dynamic of moderate growth.
