UK GDP has grown 0.2% in August, according to the latest data released by the Office for National Statistics (ONS).
It’s a relief from the previous figure of -0.6% in July (revised down from -0.5%), but the latest bounce back isn’t enough to dispel doubts around the possibility of future rate hikes and of an upcoming recession, according to experts.
Danni Hewson, head of financial analysis at AJ Bell, said that in some ways, 0.2% could be considered the Goldilocks of GDP growth, at least at first glance.
“The figure is not too hot to suggest the Bank of England has more work to do to slow down the economy and not too cold to suggest its measures have completely stalled the engine,” he said.
“Also, the fact that August stormed back from July’s damp and dismal decline is testament to the resilience of the UK economy.”
To look at the bright side, the main drivers of growth was the service sector – particularly education, engineers and architectural and legal firms. But the consumer-facing part of the service sector struggled.
“Cash-strapped households had to make choices about which activities they would splash out on whilst keeping a weather eye on budgets,” noted Hewson.
“Manufacturing and construction also remained subdued even as some cost pressures begin to ebb away. For the latter sector it seems the weather was still causing problems, with delays to planned work as whatever summer sun glinted through the gloom failed to do much to boost temperatures.”
Despite August’s growth, July’s contraction was worse than had been thought and the disruption from rail strikes in September is already making economists concerned about the next set of figures.
“There’s been a lot of talk of recession and with growth so slim it’s beginning to feel almost inevitable. The full extent of increased borrowing costs has yet to be felt and as temperatures cool and thermostats are eyed warily there’s a real sense that economic resilience is fraying,” she said.
It’s a mixed picture for the manager of Janus Henderson Cautious Managed Stephen Payne too.
“The monthly data is very volatile at the moment, impacted by both weather and strikes. The third quarter overall looks set to be about flat,” he said.
“This data is not really market-moving given it was in-line but will on balance probably be mildly reassuring. The debate about whether the UK economy slips into recession or not continues.”
Investment director at GAM Investments Charles Hepworth also didn’t find much to celebrate, noting that the figures were “bang in line with expectations”.
“Good news one may think – well perhaps not, as July’s monthly reading was revised down further to -0.6% and services remained the only area showing growth,” he said.
“The impact of the Bank of England’s aggressive hiking campaign is only just starting to bite, according to Swati Dhingra, an external member of the Bank of England's Monetary Policy Committee. It will not take much more rate pain to push the economy into more of a slowdown. As ever, the outlook for the UK economy remains precariously balanced.”