According to the results of the second quarter of this year, the UK economy showed slight growth.
The result of the second quarter, according to experts, was provided by an increase in spending in the public and manufacturing sectors. Also, in this case, the influence factor was the increase in the amount of spending by ordinary British consumers.
According to the results of the second quarter, the gross domestic product of the UK showed an increase of 0.2% compared to the result for the first three months of 2023. The relevant information was published by the Office of National Statistics on Friday, August 11. The initial forecasts of economists contained expectations of zero growth of this indicator. In the first quarter, production increased by 0.1%.
ONS Director of Economic Statistics Darren Morgan says that the reduction in the cost of raw materials has become a factor of favorable influence on the state of affairs in the manufacturing industry. This sector of the economy has shown growth. The expert also noted that the overall positive result of the economic system was influenced by the growth of hotel activity.
Additional factors stimulating the economy were government spending on public administration, the health sector, and the national defense area.
The media also noted the importance of consumer spending in the structure of the causes of overall growth. In June, the economic activity of this category of participants in the nationwide financial process was at a high level, including due to a flurry of so-called live events based on unofficial data from enterprises.
Jonathan Moyes, head of investment research at Wealth Club, a financial research firm, states that it is inappropriate at the moment to say that, from an economic point of view, the United Kingdom is in a desperate situation. At the same time, he admitted that consumer activity is likely to decrease in the third quarter.
In early January, British Prime Minister Rishi Sunak said that economic growth is one of the five priorities of the government of the country. Also, the authorities of the United Kingdom, as one of the most significant areas of their activities, determine the reduction of inflation by half. In December, inflation reached 10.5%. In June, this figure was 7.9%. At the same time, the Bank of England’s goal is inflation at the level of 2%.
The financial regulator of the United Kingdom, to curb the dynamics of prices in the direction of growth, is implementing a policy of raising interest rates. For some sectors of the economy, these measures are painful. The main cost of borrowing in the UK increased to 5.25%, which is the highest since February 2008. A rate hike is likely to put pressure on inflation.
The UK manufacturing sector has not yet returned to the level that was recorded before the outbreak of the coronavirus pandemic. The Bank of England expects that GDP figures will not reach the level of 2019 in the medium term. In the three years before the outbreak of the coronavirus pandemic, production in the United Kingdom showed quarterly growth of an average of 0.5%.
The National Institute of Economic and Social Research predicts that the UK economy will not reach the pre-pandemic level until the third quarter of 2024. If this scenario is implemented, the United Kingdom will face the problem of five years of lost economic growth.
The slow pace of economic growth and stagnation of production, according to experts of the aforementioned institute, make half of British households vulnerable and increase the level of poverty. Analysts also say about a 60% probability of a recession at the end of 2024.