Britain’s economy showed a slight recovery in August following a significant downturn in July, but overall growth remains sluggish due to high inflation and numerous interest rate hikes by the Bank of England in the past year.
August saw an economic growth of 0.2%, which aligns with predictions from a Reuters poll.
However, the decline in July, worsened by poor weather and strikes, was revised to a 0.6% decrease from a previously estimated 0.5%.
June 2022 was the previous occasion the economy experienced such a substantial monthly dip, attributed to a unique holiday commemorating Queen Elizabeth’s 70-year reign.
The International Monetary Fund recently projected that Britain will lag behind its Group of Seven counterparts in terms of growth for 2024.
This slowing growth influenced the Bank of England’s decision to pause its interest rate increases.
David Bharier from the British Chambers of Commerce stated that while the UK economy is maintaining, it remains vulnerable due to several challenges like high inflation rates, trade barriers with the EU, and a string of economic shocks over the past three years.
Consumer services are still struggling, standing 4% below their pre-pandemic levels, primarily due to the housing rental sector affected by climbing interest rates.
On a positive note, August’s growth has made a near-term recession less likely.
To prevent contraction in the upcoming quarter, the economy needs to see a growth of at least 0.2% in September, as per the ONS.
In August, the robust services sector of Britain saw an increase of 0.4%, while both manufacturing and construction sectors experienced declines.
From June to August, there was a modest overall economic growth of 0.3%.
The Bank of England’s potential to restart its rate hikes is currently deemed unlikely by investors, especially after its upcoming November meeting.
With the opposition Labour Party gaining traction in polls and an anticipated election next year, Finance Minister Jeremy Hunt is facing calls to implement tax cuts or provide other financial relief.
Hunt believes the British economy is inherently robust but acknowledges the need for accelerated growth and better management of inflation.
Surveys indicate that rising costs are causing consumers to limit non-essential spending, with the housing market particularly affected.
Despite challenges, Britain’s economy is currently 2.1% larger than its pre-pandemic state in February 2020, placing its recovery on par with similar economies.