UK GDP grows more than predicted in Q2
By Digital Look
Date: Friday 11 Aug 2023
(Sharecast News) - UK gross domestic product increased by more than expected in the second quarter of 2023, according to figures released Friday morning.
The economy expanded 0.2% between April and June, the Office for National Statistics reported in its first official estimate, with growth picking up from 0.1% in the first quarter.
This was the strongest growth rate in over a year, and showed that the economy managed to avoid stagnation like many expected. Economists had widely predicted that UK GDP would be unchanged quarter-on-quarter.
In June alone, GDP growth picked up to 0.5% month-on-month, which the ONS suggested could be due to a lack of a bank holiday, compared to May when there were three - one more than normal because of the King's Coronation.
On an annual basis, growth accelerated to 0.4% in the second quarter, from 0.2% previously.
"Contrary to a lot of expectations economic activity has managed to hold up reasonably well, despite soaring inflation which has weighed on demand, and especially on the more discretionary areas of the UK economy," said Michael Hewson, chief market analyst at CMC Markets UK.
However, he pointed out that the outlook for consumer spending and economic activity in the third quarter is likely to be more uncertain - despite petrol prices having come off their highs - as the impact of elevated interest rates starts to bite. Interest rates in the UK are currently at their highest level in over 15 years.
"With more and more fixed rate mortgages set to get refinanced in the coming months the second half of the year for the UK economy could well be a lot more challenging than the first half," Hewson said.
In a statement following the data on Friday, Ben Jones, the lead economist at the Confederation of British Industry, also painted a cautious outlook for the UK economy in the coming months. He said that the CBI's own business surveys suggest that "foundations for growth remain fragile", with finance costs and skills gaps still hampering British businesses.
"With fiscal and monetary policy expected to remain tight for the foreseeable future, we need a renewed focus on building the productive capacity of the economy, which is the surest way to drive up growth and living standards in the UK," Jones said.
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