UK services sector lifts economy back to growth in August, but BoE policymaker Swati Dhingra warns that economy is flatlining
August’s pick-up in GDP will not prevent the UK economy contracting over the third quarter of 2023, fears City consultancy Capital Economics.
Ruth Gregory, their deputy chief UK economist, predicts the UK economy will shrink in the July-September quarter, and again in October-December.
The 0.2% m/m rise in real GDP in August, following July’s 0.6% m/m contraction will raise hopes that the economy has escaped a recession.
But some of the strength of GDP in August was due to temporary factors and the timelier survey measures of activity point to a drop in real GDP in September.
“With GDP growing by 0.3% in the three months to August, and by 0.2% on a monthly basis, the UK economy is holding up but remains in a precarious state. The production sector in particular has seen worrying data revisions showing stark monthly falls in growth.
“Our research is clear about the issues UK firms are facing – three years of economic shocks, high inflation and interest rates, skills shortages, and trade barriers with the European Union. Consequently, most SMEs report no increase in their investment plans.
