The latest economic data announced this morning, shows that UK GDP has grown by 0.6% in the second quarter of 2024 – meaning the UK economy has seen two consecutive quarters of growth. Good news indeed. It indicates that the UK economy is therefore performing relatively well compared to other G7 countries as it continues its recovery from the technical recession experienced at the end of 2023.
People from across the industry have been sharing their reaction to the news and whether it has particular significance for the economy going forwards as follows:
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures saying:
“The UK economy has kept its foot on the accelerator pedal as it continues to put last year’s recession firmly in the rear-view mirror.
“At 0.6%, growth in the second quarter is higher than that being enjoyed in the rest of the G7 with the exception of the USA, 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.
“But it’s not all good news and June looked distinctly limp as election uncertainty put off some spending decisions by business, whilst the impact of strike action continued to exert pressure on the economy. The weather also played a part with retail sales suffering as summer seemed to go missing for much of the month.
“This kind of economic data never used to be dinner table conversation, but that’s changed over the past couple of years and households are now more aware of the importance of achieving and maintaining decent growth levels. The new Labour government put growth at the heart of its election campaign, although this growth didn’t happen on their watch and the kind of post cost crunch boost we’ve been enjoying can only come once.
“The ONS suggests that some declines in manufacturing over the first part of the year have come from businesses re-tooling and reimagining their lines for a different age, particularly in the auto sector. And looking at June’s figures there was a marked uptick in output which bodes well for the second half of the year.
“There’s also been a lot of focus on construction with national housebuilding targets to be reintroduced in a bid to deal with the housing shortage, especially for those seeking affordable homes.
“The interest rate cut from the Bank of England which 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.”
Luke Bartholomew, Deputy Chief Economist at abrdn, said:
“There were no surprises in the UK GDP report, confirming that the economy has enjoyed a strong recovery from its mild technical recession last year. Growth may slow a little in the second half of the year, as rises in real incomes continue to gradually come down. Interestingly, the UK seems to be in a very different part of the cycle than the US, where the economy is cooling after a very strong 2023. This helps to explain some of the difference in urgency around monetary policy easing in the two countries, with the Fed likely to be more active in cutting rates later this year than the Bank of England. But with UK services inflation finally starting to moderate sharply, there is certainly space for the BoE to also cut rates again this year.”
Mr Sarwar Khawaja FRSA, chairman, executive board, Oxford Business College, said: “The UK economy has shown some resilience in the face of ongoing challenges, with two quarters of growth suggesting a modest step forwards.
“The services sector, which has long been the backbone of the UK economy, has been the main driver of this growth. This robust performance is encouraging, as it suggests the sector is adapting to the post-pandemic landscape and finding ways to thrive despite ongoing economic pressures.
“The picture is not uniformly positive across all sectors. Both production and construction output contracted slightly, showing the uneven nature of the UK’s economic recovery.
“One concern is the performance of consumer-facing services, which saw a slight decline of 0.1% in Q2 compared to Q1. Despite the overall growth in services, businesses directly serving consumers are still feeling the pinch due to the ongoing cost-of-living crisis and its impact on household spending.
“For businesses, these figures present a mixed bag. Those in the services sector that are less dependent on direct consumer spending may find opportunities for growth and expansion. However, companies in production, construction, and consumer-facing services may need to brace themselves for continued challenges and focus on efficiency and innovation to maintain their competitive edge.
“Business and political leaders will be asking whether this growth can be sustained and broadened across all sectors. The resilience shown by the services sector is encouraging, but for a truly robust recovery, we need to see stronger performance in production and construction as well. “It’s positive that the UK economy is showing signs of recovery, but the path ahead remains challenging. The coming quarters will be crucial in determining whether this growth can be sustained and broadened to create a more balanced and resilient economic recovery.”
David McCreadie, the CEO of Secure Trust Bank said:
“The UK GDP increased by 0.6% in Q2 2024, driven primarily by the services sector, which recorded a growth of 0.8%. The largest contributor to this growth was the professional, scientific, and technical activities subsector, which saw a notable 2.5% increase. However, this was partially offset by a 0.1% decline in both the production and construction sectors. This Q2 GDP growth is slightly lower than the previous quarter’s 0.7% increase.
“Consumer-facing services fell by 0.1% in Q2, following a 0.6% rise in Q1. The main factors behind this decline were a 1.2% decrease in the buying and selling, renting, and operating of real estate (excluding imputed rental), and a 1.4% drop in wholesale and retail trade, as well as the repair of motor vehicles and motorcycles.
“The slight dip in GDP for the second quarter was primarily due to stagnant growth in June 2024, following a 0.4% increase in May 2024 and no growth in April 2024. Overall, this presents a positive outlook, considering the economy had contracted in Q3 and Q4 2023 by -0.1% and -0.3%, respectively.
“The GDP data also supports the case for the Bank of England to consider cutting interest rates, as it indicates that the economy is in a relatively healthy state. Today’s growth figures come on the heels of yesterday’s CPI data, which showed inflation rising to 2.2% in July – the first increase since December 2023. However, this was below the forecasted 2.3%, which can be seen as a positive sign that price pressures are continuing to normalise for households and businesses.
“The new Labour government and the Chancellor will be keenly aware of the need to accelerate economic growth, as this is crucial for improving living standards and increasing investment in public services. The upcoming Autumn Statement will be a significant event in this regard.”
