UK GDP expands by 0.6% as services sector drives growth – business live | Business

Chancellor Rachel Reeves is not hanging out the bunting.

Following the news that the economy grew by 0.6% in April-June (a decent growth rate), Reeves says:

“The new Government is under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth and a £22 billion black hole in the public finances.

“That is why we have made economic growth our national mission and we are taking the tough decisions now to fix the foundations, so we can rebuild Britain and make every part of the country better off.”

Pre-election uncertainty, and industrial action, may both have weighed on the economy in June.

The Office for National Statistics says anecdotal evidence from businesses suggests some clients were reluctant to place orders until they knew who had won the election.

That could have contributed to the lack of growth in June.

The ONS says:

Comments provided for June 2024 suggested some industries may have been affected by the general election held on 4 July 2024. In a range of industries across the economy, businesses stated that customers were delaying placing orders until the outcome of the election was known. These comments covered all of manufacturing, construction, and services.

A strike by junior doctors in late June, and the impact of last year’s Hollywood strikes, could also have hit activity.

The ONS adds:

While perhaps not as frequently mentioned as in recent months, industrial action in certain industries was also cited as a possible reason for reduced output.

This was stated as a reason for reduced output in human health with the junior doctors strikes towards the end of June, and in TV and film production where the Screen Actors Guild strikes in America in 2023 are still affecting UK production schedules.

The UK economy is in ‘good health’, says Neil Birrell, chief investment officer at Premier Miton Investors:

Following this morning’s Q2 GDP report, Birrell says:

“The second quarter seems like a long time ago, but the GDP data confirms that the UK economy is in good health. The Bank of England is in the nice position, unlike other central banks, of having a level of surety in the data it is seeing, when setting policy.

With inflation playing ball as well, the path to lower interest rates looks to be set, the timing of the cuts is now the focus.”

When you adjust for population changes, growth was less vigorous

The ONS reports that real GDP per head is estimated to have increased by 0.3% in Quarter 2 2024 – only half as fast as the headline growth rate for the quarter.

Real GDP per head is 0.1% lower compared with the same quarter a year ago.

GDP per head, or per capita, is commonly used as a broad measure of average living standards or economic well- being.

The UK has now grown “strongly” for two quarters in a row, says ONS director of economic statistics Liz McKeown:

“The UK economy has now grown strongly for two quarters, following the weakness we saw in the second half of last year.

“Growth across the three months was led by the service sector, where scientific research, the IT industry and legal services all did well.

“In June growth was flat with services falling, due to a weak month for health, retailing and wholesaling, offset by widespread growth in manufacturing.”

Today’s GDP report also shows the economy did not grow in June.

GDP showed no change in June, the Office for National Statistics reports, following growth of 0.4% in May.

Digging into the details… services output fell by 0.1% in June, while production output grew by 0.8% in the month, and construction output grew by 0.5%

Newsflash: The UK economy grew by 0.6% in the second quarter of the year, as it continues to pull away from last year’s shallow recession.

That’s a slight slowdown on the first quarter, where the economy expanded by 0.7%, but still a healthy growth rate – and in line with expectations.

The Office for National Statistics reports that the services sector drove growth, while the production sector and construction both shrank slightly.

Compared with a year ago, real GDP is estimated to have increased by 0.9%.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

How strongly, or weakly, was the UK economy growing at the end of Rishi Sunak’s premiership?

We’ll find out shortly, when GDP data for June – and for the second quarter of 2024 – are released.

City economists predict the UK posted a quarter of solid growth. GDP is forecast to have grown by 0.6% in April-June, which would be a slight slowdown on the 0.7% recorded in January-March.

But in June alone, the economy may have stalled – with no growth forecast.

Sanjay Raja, chief UK economist at Deutsche Bank, says the service sector was driving activity in the last quarter:

On our calculations, the services economy will likely bounce up by 0.7% q-o-q – despite expected contractions in both the production and construction sectors over the same quarter.

On the expenditure side, we expect government spending, business investment, inventories, and net acquisitions to provide the bulk of the lift to quarterly GDP.

The strength – or otherwise – of the UK economy will also influence how soon the Bank of England feels confident to cut interest rates again, after inflation rose by less than expected in July:

The agenda

• 7am BST: UK GDP report for June

• 7am BST: UK trade report for June

• 7am BST: UK GDP report for Q2 2024

• 9am BST: Norwegian central bank interest rate decision

• 9.30am BST: UK labour productivity statistics

• 1.30pm BST: US weekly jobless claims

• 1.30pm BST: US retail sales for July