UK GDP growth appears to be flagging, with August seeing a rise of just 0.1% month-over-month, a sharp decline from the 0.4% brought by June and July.
The Office of National Statistics (ONS) attributes this to production, which grew by 0.8%, while the services sector saw “no growth” and construction suffered a decline of 0.2%.
The three-monthly outlook was stronger, with an estimate of 0.7% growth in the three months to August. In contrast with the monthly statistic, the services sector produced the strongest growth at 0.9%, while construction fell by 1.0% and production fell by 0.2%.
August’s decrease in service-related productivity is a sign the sector has “begun to buckle under the pressure of rising prices and consumer caution”, according to Danni Hewson, head of financial analysis at AJ Bell.
See also: UK GDP rises by 0.6% in Q1: Does this mark the country’s ‘peak for growth’?
Nonetheless, the UK economy has demonstrated remarkable resilience, despite pressure from taxation and rising energy prices. Consumer spending and productivity grew by 0.4% in the three months to August, though August itself brought a downturn of 0.3%.
“The 0.1% monthly increase in GDP is far better than many had been expecting,” said Hewson.
AI-related productivity has also been hailed as a major theme, driving manufacture and improving productivity output in the software sector.
Andrew Wishart, senior UK economist at Berenberg, said: “The sector breakdown suggests that AI is behind much of the upswing. Rapid increases in computer programming output continued, raising the output of the ‘information and communication’ sector by 7.1% year-on-year and contributing about +0.5ppt to annual growth.”
This resilience is predicted to improve the chancellor’s room to manoeuvre in the upcoming Budget, though not without some caution.
Susannah Streeter, chief investment strategist at Wealth Club, said: “Even if the UK flatlines going forward, growth looks set to beat even the upgraded forecast of 1.3% from the International Monetary Fund which was released this week.
“This markedly better performance than expected will provide a boost to Andy Burnham and his Chancellor John Healey ahead of the Budget. But there could be a sting in the tail – higher energy costs risk becoming more embedded in the economy and force interest rates higher, putting the brakes on growth more sharply next year.”
