Stuttering economy grew by 0.2 per cent in last three months
The UK’s stuttering economy grew by just 0.2 per cent in the second quarter of the year according to the Office for National Statistics.
According to the official data June saw the largest growth at 0.5 per cent.
June’s figures followed a fall of 0.1 per cent in May and growth of 0.2 per cent in April – taking the overall growth of the UK economy to 0.2 per cent for the last three months.
The improved picture is partly a result of the lack of Bank Holidays in June. The UK had three Bank Holidays in May as a result of the coronation.
The figures also suggest that the UK is now likely to escape falling into recession.
The ONS’s director of economic statistics Darren Morgan said: “The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June.
“Manufacturing saw a particularly strong month with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.”
According to some commentators the improvement in the figures will not lead to halt in interest rate rises.
David Baker, a partner at Mazars, said: “The better-than-expected GDP figures are likely to galvanise the Bank of England’s zeal to continue to raise interest rates.
“The Bank will remain very concerned about the persistence of inflation and will reflect on near full employment and high wage inflation as reasons to keep policy tight, despite higher mortgage rates denting consumer confidence and business surveys still pointing to lacklustre future growth.
“The age-old question of just how long it takes for rate rises to impact the real economy is now more pertinent than ever, but we suspect that we will not have seen the end of rate rises especially now that the economy is showing some resilience.”
Neil Rudge, head of enterprise at lenders Shawbrook, said “The UK has followed its counterparts in Europe and the US, posting a moderate increase in GDP.
“SME owners around the country will breathe a small sigh of relief as macroeconomic indicators start to show marginal improvements, with inflation finally beginning to fall and the peak of the interest rate cycle now in view. Though the prospect of a recession is subsiding, sluggish growth and expensive borrowing costs continue to be obstacles that business expansion plans need to navigate.”
He added: “Whilst the overall macro picture is beginning to look more positive, challenges are still present for SMEs.
“One area where this is evident is the labour market, which is bearing the effects of slow activity. Earlier this week KPMG released its latest report on jobs, showing permanent hirings falling to the lowest rate seen in three years. This illuminates one of the many challenges businesses are facing in the current environment.”
Mike Randall, chief executive of Simply Asset Finance, says: “Modest growth in June reflects a positive outlook for businesses as we creep closer to the Bank of England’s end of year growth forecast.
“After the latest BDO business trends report indicated that employers’ hiring intentions had dropped in June for the first time in six months, a slight increase in GDP will be welcome news for businesses looking to build their business and expand their workforces.
“However, with the economy still lagging behind industry expectations, it’s evident businesses will need more than a slight increase in GDP to maintain their confidence. With interest rates remaining high and inflation yet to reach comfortable levels, access to funding remains critical to business growth.”
Marco Forgione, director general of the Institute of Export and International Trade, said: “Today’s statistics demonstrate the positive impact that international trade can have on the economy. But clearly more work still needs to be done to support businesses in achieving sustainable, long-term growth. It is encouraging to see a slight uptick in manufacturing exports in June with an increase in machinery and transport contributing to this rise.
“Today’s numbers illustrate how exporting can be a catalyst for recovery and new opportunities. It is good to see signs that UK firms are looking to create new opportunities further afield. There has been a notable increase in firms exporting to the likes of Argentina, Canada, Malaysia and New Zealand in the second quarter of this year.
“It is vital that we get more businesses trading internationally and for the UK to be seen as an attractive option for inward investment, if we are to tackle the cost-of-living crisis and to produce real economic growth.”