UK Economy Returns to Growth in August after Two Months of Stagnation

• Britain's economy grew in August after two consecutive months of stagnation, providing some relief to finance minister Rachel Reeves ahead of the new Labour government's first budget later this month.
• Economic output rose by 0.2% in monthly terms in August, according to figures from the Office for National Statistics that were in line with expectations in a Reuters poll of economists. "This will provide a timely boost for the chancellor amidst a backdrop of growing spending pressures," said Yael Selfin, chief economist at KPMG UK.
• All major sectors showed growth in August, the statistics office said, but weaker-than-expected growth in the dominant services sector. This was offset by a strong rebound in manufacturing and construction.
• Sterling changed a little after the figures were released, with investors continuing to bet on a quarter-point rate cut by the Bank of England in November. Compared to a year ago, economic output was 1.0% higher, below the 1.4% growth forecast by economists, a miss that reflected the downward revisions to previous months.
• Britain's economy now looks on track to grow in the second half of the year, albeit at a slower rate than in the first quarter. Last month, the Bank of England said it expected economic growth to slow to 0.3% in the third quarter and a similar rate of growth in the final three months of 2024.
• "The big question mark is the government's vision for the economy," said Barret Kupelian, chief economist at PwC. "For economic growth to continue on a sustained basis, businesses, households, and foreign investors require certainty to make choices and investment decisions."

(Source: Reuters)