The UK economy slowed in August but maintained a resilient upward trajectory, growing by 0.1%, according to the Office for National Statistics.
This is a marked slowdown from July, in which the economy grew by 0.5% – revised from an initial figure of 0.4%.
Growth in the three months to August now sits at 0.7%, surpassing forecasts of 0.5%.
Danni Hewson, head of financial analysis, said the UK’s latest growth figures “don’t paint a particularly rosy picture of the UK economy” but 0.1% growth is “far better than many had been expecting”.
Andrew Wishart, senior UK economist at Berenberg, attributed this latest swell of growth to AI.
“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 0.5 percentage points to annual growth,” he said.
Alongside the expansion of AI, Wishart noted that consumer expenditure has also proven “remarkably resilient” to a rising tax burden, higher energy prices and mortgage rates and a weak labour market.
“Admittedly, bigger challenges lie ahead following the fresh step up in energy prices and interest rates in September,” Wishart said.
“We expect consumer spending to lose some momentum as a result.”
In addition, growth in accountancy, legal services and scientific research and development has also moved up a gear, raising the ‘professional, scientific and technical activities’ sector output by 9% year-on-year and contributing 0.8 percentage points to growth.
The latest GDP figures come as chancellor John Healey prepares to unveil his first Budget on 28 October, in which he will need to contend with sticky inflation and higher borrowing costs while addressing fiscal headroom.
Hewson said: “When you consider the global backdrop, the fact that the UK has demonstrated such resilience does give the chancellor something to build upon with his first Budget.”
However, she noted that the momentum that had grown over the long hot summer of sport has faltered and the dominant service sector has begun to buckle under the pressure of rising prices and consumer caution.
“Households and businesses are worried about what the winter might bring and what measures Healey could deploy to deliver on the government’s promises, whilst sticking to fiscal rules – and August’s slowdown hints at trouble ahead,” Hewson said.
The economy’s resilience might also provide the Bank of England with enough cover to hike interest rates at next month’s meeting, Hewson suggested, noting markets are now pricing in a 94% chance of a rise in November as the central bank aims to keep inflation from spiralling.
“Whilst the UK economy has held firm against its doubters, it remains vulnerable, and the coming months are likely to prove taxing,” she said.