Newsflash: The UK economy has surpassed expectations with 0.2% growth in the second quarter of this year, dispelling fears of stagnation. The Office for National Statistics reports that UK GDP expanded by 0.2% in the months of April-June, beating forecasts of no growth. This follows a growth of 0.1% in January-March. In June, the economy also performed better than expected, with growth reaching 0.5%. This follows a GDP fall of 0.1% in May and growth of 0.2% in April.
The Office for National Statistics explains that in terms of output, the services sector grew by 0.1% in the quarter, driven by increases in information and communication, accommodation and food service activities, and human health and social work activities. In contrast, the production sector grew by 0.7%, with manufacturing experiencing 1.6% growth. On the expenditure side, there was strong growth in household consumption and government consumption, partially offset by a decline in international trade flows in the second quarter.
Despite the positive growth in the economy, TUC general secretary Paul Nowak has criticized Chancellor Jeremy Hunt for his handling of the UK economy. Nowak warns that jobs are at risk and that pay and conditions are being suppressed. He urges the government to take responsibility and act to address the economic challenges the country faces.
Chief economist for the Joseph Rowntre Foundation, Alfie Stirling, highlights the growing financial struggles faced by many low-income families. Stirling explains that even those who are not immediately in hardship are experiencing financial pressure due to rising rent, food, energy, and credit costs. Stirling argues that the economy is not working for many people and calls for more investment and better job opportunities.
According to the Resolution Foundation, although the UK’s GDP growth in April-June is stronger than expected, growth over the past 18 months has been the weakest in 65 years outside of a recession. The Foundation warns that high inflation and rapid increases in interest rates make the period feel like a recession for many. They argue that weak growth poses challenges for families facing rising living costs and mortgage repayments.
Treasury minister John Glen acknowledges the difficulties of achieving higher growth while dealing with inflation pressures. Glen highlights the UK’s relative resilience compared to other G7 countries and the government’s efforts to balance inflation and growth. He also addresses the revelation that Conservative MP Theresa Villiers held £70,000 worth of shares in Shell while serving as environment secretary, calling it an oversight on Villiers’ part.
The ONS reports that the UK economy has yet to recover its pre-pandemic level, with quarterly GDP in Q2 2023 still 0.2% below its level at the end of 2019. The UK is currently the only large advanced economy that has not regained its pre-COVID level. Reuters highlights that the UK lags behind its peers in GDP growth.
Ed Monk, associate director for Personal Investing at Fidelity International, notes that the strong performance of household expenditure has helped the UK economy avoid recession. Monk attributes this to a tight labor market and rising wages, as well as government support in areas such as energy prices and the state pension. However, he warns that conditions may worsen as interest rates rise, wage growth slows, and the job market weakens.
Chancellor of the Exchequer Jeremy Hunt welcomes the news of UK economic growth and states that the government’s actions to combat inflation are starting to take effect.