The UK economy showed no growth in July after flatlining in June, dismal figures reveal.
Monthly real gross domestic product (GDP) is estimated to have shown no growth, while real GDP is estimated to have grown 0.5% in the three months to July compared to the previous quarter.
According to the figures from the Office for National Statistics (ONS), however, “widespread growth” was recorded in the services sector.
It revealed that services output grew 0.1% in July 2024, curbing the 0.1% decrease recorded in June. Over the three-month period, it grew 0.6%.
Turning to production output, the ONS recorded a 0.8% decline in July, a big contrast to the 0.8% growth in June. However, over the three months to July, production output decreased by 0.1%.
Meanwhile, construction output decreased 0.4% in July 2024, following growth of 0.5% in June. However, over the quarter, it grew 1.2%, with the ONS noting this is its first positive three-month growth spell since September 2023.
‘Stagnation deeply concerning’
Isaac Stell, investment manager at Wealth Club, said the month-on-month GDP figures missed all estimates, producing a “fairly dismal” set of numbers, with the services sector managing to mitigate the declines seen in the construction and manufacturing sectors.
“A reversal in the fortunes for the manufacturing and construction sectors is a blow to the new Labour Government that has growth as a central pillar of its agenda,” he said.
Stell added: “The usual bright spot was the bounce-back in growth for the services sector, with the health sector one of the leading contributors, springing back to life following strike action in June.
“A notable slowdown in advertising and architects may be indicative of a wider slowdown. With the canaries beginning to look a bit peaky, the Chancellor may need to tread more carefully in October.”
Sarwar Khawaja, chair of the executive board of Oxford Business College, said: “The UK economy’s stagnation in July is deeply concerning. While we hoped to see modest growth, the data paints a picture of an economy treading water.
“The services sector has run out of steam, and even the boost from summer sporting events couldn’t offset declines in production and construction. The overall picture of a broader weakness across the economy can’t be easily dismissed.”
Khawaja added that high interest rates are “clearly taking their toll, squeezing businesses and consumers alike”.
He said that the entrenchment of inflation is perhaps the most worrying aspect.
“The persistence of this thorny issue threatens to undermine any green shoots of recovery and complicates the task for policymakers,” he added.
Meanwhile, Ruth Gregory, deputy chief UK economist at Capital Economics, said that while the economy stagnated in July, it “doesn’t mean the UK is on the cusp of another recession”.
“We still think the stickiness of inflation will keep the bank on hold in September”, she said.
Gregory added: “Other indicators, such as the activity PMIs, suggest the economy is still expanding by about 0.4% q/q. So we still think a mild slowdown in GDP growth to more normal rates of 0.3% q/q later this year is more likely than a sudden drop back into recession.
“For now, we are sticking to our view that the Bank of England will keep interest rates unchanged in September before cutting rates again in November. But today’s data has made an interest rate cut next Thursday a bit more likely.”
