GDP measures the value of goods and services produced in the UK. It estimates the size of – and growth in – the economy.
UK GDP is estimated to have increased by 0.6% between April and June 2024, following growth of 0.7% in the previous quarter (January to March).
According to the ONS, compared with the same quarter a year ago, GDP is estimated to have increased 0.9% in Q2 2024.
However, GDP is estimated to have shown no growth in June 2024, following unrevised growth of 0.4% in May 2024 and no growth in April 2024.
For Q2, growth was attributed to the 0.8% rise in services output – for the second consecutive quarter – with early estimates suggesting 14 out of 20 of the sub-sectors grew, which offset falls in both the production and construction sectors.
However, on a month-by-month snapshot, services output fell by 0.1% in June.
Production output grew by 0.8% in June, following growth of 0.3% in May, but fell by 0.1% in the three months to June.
Meanwhile, construction output grew by 0.5% in June, following growth of 1.7% in May, but fell by 0.1% in the three months to June.
Economic confidence and base rate speculation
Nicholas Hyett, investment manager at Wealth Club, said: “The weakness in the all-important services sector reflects a slowdown in the retail sector as well as strikes by junior doctors, though the professional services sector remains resilient and is now in its fifth consecutive month of growth.
“Positive signs in the manufacturing and construction sectors bode well for the future, given the longer lead times in these sectors. Increased activity implies rising economic confidence with the potential to sustain longer-term economic growth.”
Hyett added: “However, the crucial number from a political point of view is the quarterly growth figure – and at 0.6%, it’s pretty healthy. With potential for interest rate cuts to stimulate activity in the second half of the year, the recession of late 2023 seems a long time ago.”
Danni Hewson, AJ Bell’s head of financial analysis, said the quarterly growth is higher than that being enjoyed in the rest of the G7 with the exception of the US, although Germany and Japan are yet to update their figures.
“Household consumption was up as people have got a few more pennies in their pockets thanks to falling inflation and strong wage growth. That extra cash sloshing around has provided the fuel for the kind of growth that’s been lacking for the past couple of years when the economy seemed to flatline following its post-Covid recovery.”
Hewson added: “The interest rate cut from the Bank of England [that] came in August has already seen competition in the mortgage market hotting up and confidence building. But there are no easy answers or quick solutions to ensure that growth maintains its current trajectory and doesn’t get bogged back down in the same old sticky problems.”
Meanwhile, Ashley Webb, UK economist at Capital Economics, said today’s release doesn’t change their view that the bank will keep interest rates on hold at 5% at the next policy meeting in September.
“But with the timely PMI data suggesting GDP growth slowed at the beginning of Q3, at the margin this lends a bit more support to our view that interest rates will be cut twice more this year, to 4.5%,” Webb added.
