GDP growth up 0.2% driven by construction
by Sara White, Editor, Accountancy Daily
After a flat July, GDP was up by 0.2% in August, with the strongest growth across construction and manufacturing, but risk of inflation this autumn a concern
After months of poor performance, the construction sector grew by 0.4% driven by work in the private new housing subsector, which was up by 3.4%, as well as more repair projects, an early sign that the government’s reform of planning and a slight easing in mortgage costs could be having an impact.
The services sector grew by 0.1%, helped by a rise in 1.2% rise in the retail trade, while professional, scientific and technical activities was the largest positive contributor with growth of 1.6% in August 2024.
Services growth was mainly driven by increases of 4.3% in accounting, bookkeeping and auditing activities; tax consultancy industry, 1.7% in legal activities and 2.8% in scientific research and development.
Despite output in the services sector rising overall in August, there were negative contributions from seven subsectors including falls of 2.5% in arts, entertainment and recreation, 0.5% in administrative and support services, 0.8% in transport, and 0.3% in wholesale and retail trade. The largest fall over the period hit health and social work activities, down by 1.1%.
Joe Nellis, MHA’s economic adviser, said: ‘While the moderate growth in GDP will no doubt be welcomed by the government and business, they do reflect a UK economy that has been close to stagnation since July.
‘The over cautious and at times negative messages coming from the government and an air of uncertainty in the lengthy lead-up to the Budget have certainly discouraged corporate investment and household expenditure.
‘The government will be hoping that their long overdue Budget and a possible cut in interest rates by the Bank of England early next month will create a more conducive environment for investment, reigniting growth in the UK economy.’
Looking over the longer term, the Office for National Statistics said that GDP was estimated to have increased by 0.8% in the three months to August 2024 compared with the same period in August 2023, but warned of possible inflationary pressures later in the year.
‘While this was a brighter end to the summer, the overall picture is of the economy slowing in the second half of the year,’ warned Susannah Streeter, head of money and markets at Hargreaves Lansdown.
‘This is increasing bets for another interest rate cut in November. The financial markets are now pricing in around an 80% chance of another reduction next month, compared to 70% before the GDP figures were released.’
Negative messaging and concerns about the harshness of the Budget are also more than likely to hit growth figures in September.
Danni Hewson, AJ Bell head of financial analysis, said: ‘After two months of flatlining it will be welcome news to the government that forward economic momentum returned in August, although 0.2% isn’t exactly the kind of growth that it needs to power the country forward.
‘But the broader picture is of a country still trudging along, finding it hard to change gear. And there’s concern that August was a blip, and that September’s numbers will herald a return to the flatline that seems to have become the new normal.’
Reacting to the growth figures, Chancellor Rachel Reeves said: ‘It’s welcome news that growth has returned to the economy. Growing the economy is the number one priority of this government so we can fix the NHS, rebuild Britain, and make working people better off.
‘ Next week hundreds of the world’s biggest businesses will come to Britain as we deliver on our promise to bring investment, growth, and jobs back to every part of the country.’
