The UK economy grew 0.6% in the second quarter of this year, continuing its cautious recovery from recession, the Office for National Statistics said on Thursday.
The figure was in line with expectations of economists polled by Reuters and followed a 0.7 percent expansion in the first quarter.
A Reuters poll showed economic growth was flat in June, with activity in Britain’s key services sector falling 0.1 percent. Construction and output rose 0.5 percent and 0.8 percent respectively in the month.
The UK economy has emerged from a mild recession and has recorded small but steady growth in most months of the year, with GDP remaining flat in April after wet weather depressed retail sales and construction output.
Economic growth in the second quarter rose 0.9% from a year earlier, beating the forecast of 0.8% growth.
“These figures confirm that the UK’s recovery from recession accelerated in the second quarter, despite strikes and wet weather slowing economic activity in June,” Suren Till, director of economics at the Institute of Chartered Accountants in England and Wales, said in a note.
“The UK’s strong second quarter was largely due to one-off momentum from a recent significant decline in inflation and increased consumer spending due to events such as Euro 2024, rather than any significant improvement in the UK’s underlying growth trajectory,” Till continued.
Till added that the pace of growth is unlikely to continue in the second half of the year due to slowing wage growth, high interest rates and supply issues.
UK inflation rose to 2.2% in July, slightly below market expectations of 2.3%, according to data released by the Office for National Statistics on Wednesday. The headline figure marked the second consecutive month above the Bank of England’s 2% target rate and helped trigger the central bank’s decision to cut interest rates by 25 basis points in early August.
Analysts said the July figures supported consistent monetary easing throughout the year, despite stubborn service sector inflation.
Between April and June, UK wage growth excluding bonuses fell to its lowest level in two years, but remained relatively high at 5.4%.
Richard Carter, head of fixed rate research at Quilter Cheviot, said lower interest rates “will make borrowing more affordable for households and businesses and boost economic growth” in the coming months, but noted the impact will take time to be felt.
The British pound rose slightly following Thursday’s GDP release, up 0.1% against the U.S. dollar and 0.2% against the euro as of 7:35 a.m. London time.
Institutions including the International Monetary Fund, investment bank Goldman Sachs and the Bank of England have all raised their growth forecasts for the UK economy in recent months, with the IMF predicting growth of 0.7% this year, up from 0.5% previously.
The reasons cited are falling inflation and reforms to planning and business rules planned by the new Labour government that took office in July. Chancellor Keir Starmer and Chancellor of the Exchequer Rachel Reeves have repeatedly said that boosting economic growth will be the cornerstone of their policymaking, with a goal of the UK achieving the fastest GDP per capita growth in the G7 countries.
“The new government is under no illusions about the scale of the challenge we inherit after more than a decade of low economic growth and a £22 billion budget deficit,” Mr Reeves said in a statement on Thursday.
Labour is due to deliver its first budget on October 30, which analysts say will provide greater clarity on the government’s fiscal strategy and planned changes to taxation and public spending.
As a result, “we are unlikely to see a significant acceleration in GDP in the near term,” said Richard Carter of Quilter Cheviot.
“For now, the economy is expected to continue on a relatively moderate growth trajectory, supported by above-inflation wage growth and recent accommodative monetary policy,” he added.
