The recent GDP releases indicate that the UK’s economic output – or gross domestic product (GDP) – is growing, although very slowly. This expansion is occurring at an excruciatingly slow rate. This comes after strong GDP growth of 0.7% for the first three months of the year. This boom was propelled by a technical export repositioning and a housing transaction rebound. That growth rate has dropped like a rock to 0.3% in the spring quarter. This political shift would be mildly surprising, perhaps, if our current economic expansion were clearly sustainable.
Businesses already exporting to the US were moving early this year to take advantage. Because of this preemptive action, they were able to boost their initial projected growth rate of 0.7%, thus avoiding the tariffs they expected. Plus, changes in stamp duty regulations encouraged housing sales, puffing up the growth figure even more. The following month’s data showed an emerging tone of caution, with growth for the spring quarter revised down to just 0.3%.
Meanwhile, the UK’s GDP growth in the first half of the year is at 1%. This was the strongest growth among all other G20 major economies over that same period. This performance is particularly remarkable given the deep uncertainty caused by a slowdown in global economic growth. Yet the UK economy is growing, not at a sustainable rate though. Given the lack of economic or market rationale this trend were to continue, makes one question its long-term stability.
Further, the IT sector was a bright spot in June’s economic performance, pointing to the strengths found within specific sectors. Additionally, consumers seem to be continuing a high savings rate as seen by double-digit rates from saving in a pattern akin to pandemic-era saving outpaces. Together, these trends indicate that although consumers are still cautious, they’re willing and able to participate in the economy.
Still, the surprise increase in the most recent monthly GDP figure, boosted mainly by strong service sector performance, exceeded expectations. May’s data, released in June, painted an unexpectedly positive picture compared to what analysts had anticipated. The previously reported 0.3% decrease in April was revised up. This figure has now been revised upward, a reflection of an overall strengthening of economic conditions.
As reported in recent weeks, economists have forecast persistent though sluggish growth for the UK economy in the coming months. Early estimates had led some to expect the economy to come close to flat-lining given extremely erratic monthly data releases. As seen in these recent trends, though perhaps slow, growth is not only continuing, but is steady and consistent.