GDP did not grow in July 2024 for the second month in a row, after no growth was also recorded in June.
It comes after analysts expected to see the economy gain some momentum amid GDP growing 0.6 per cent in the three months to June.
According to today’s figures, services output grew by 0.1 per cent in July 2024 but was offset by decreases of 0.8 per cent in production output and 0.4 per cent in construction output.
Lindsay James, investment strategist at Quilter Investors warned given the current mood emanating from government in relation to the economic inheritance it has received from the Tories, it needed to be “careful” not to overcorrect with its narrative around tax rises and the potential this has to put off investment.
“This month may just be a blip however, given recent positive noises that have been sounded about the state of the wider economy, especially as rate cuts will continue to be delivered over the coming year," she said.
“Expectations for the UK economy have gradually shifted higher, with the IMF now forecasting UK GDP growth of 0.7 per cent in 2024, up from 0.5 per cent previously, whilst another measurement of economist forecasts has seen it rise from a low of 0.3 per cent in March to one per cent currently. The government will hope today’s figure does not dampen those forecasts."
Sarwar Khawaja, chairman of the executive board at Oxford Business College felt the data painted the picture of an economy “treading water”.
He said: “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.
“High interest rates are clearly taking their toll, squeezing businesses and consumers alike. Companies are caught between rising costs and pressure to increase wages. Unfortunately, this financial vice is likely to lead to increased redundancies as firms struggle to balance their books.
“These figures underscore the complex challenges facing the UK economy, and businesses should brace for a difficult period ahead. The absence of a quick fix means that both companies and policymakers will need to show resilience, adaptability, and strategic thinking to navigate these turbulent economic waters.”
Kevin Brown, savings specialist at Scottish Friendly, said all eyes would now be on the Budget next month and what it may contain.
“Households will hope for fewer tough measures than have been predicted, particularly as the economy falters. It is important in this context for families to prepare for any event, which makes thinking about rainy day funds and long-term investing goals all the more important,” he added.
alina.khan@ft.com
