LONDON — The U.K. economy remained stagnant in July on a month-on-month basis, according to preliminary data released by the Office for National Statistics on Wednesday.
Gross domestic product (GDP) fell short of the 0.2% growth forecasted by economists surveyed by Reuters.
In June, the country also experienced no GDP growth.
During July, the services sector, which is dominant in Britain, saw a slight increase of 0.1%, while production and construction output declined by 0.8% and 0.4%, respectively.
The U.K.’s economic growth for the three months leading up to July was 0.5%, slightly lower than economists’ expectations and the 0.6% growth seen in the previous quarter ending in June.
Liz McKeown, the director of economic statistics at the ONS, commented, “The economy showed no growth for the second consecutive month, but the services sector’s strength over the longer term led to growth over the last three months as a whole.”
The U.K. economy had been experiencing modest and consistent growth almost every month this year after emerging from a mild recession at the beginning of the year.
This data is the first release under the new Labour government led by Prime Minister Keir Starmer, who took office on July 4.
Finance Minister Rachel Reeves acknowledged the challenges facing the U.K. economy, stating that the recent data highlights the need for gradual change. Reeves emphasized that two quarters of positive economic growth do not compensate for the fourteen years of stagnation.
The upcoming Autumn Statement on Oct. 30 will reveal the annual budget, with Reeves warning that it will be a tough one due to the £22 billion ($29 billion) deficit inherited from the previous Conservative government. Former Prime Minister Jeremy Hunt has refuted these claims, dismissing the alleged deficit as “fiction.”
Lindsay James, an investment strategist at Quilter Investors, mentioned that potential tax increases could lead to more cautious consumer spending in the coming months. However, she noted that anticipated interest rate adjustments by the Bank of England might help alleviate broader growth challenges. The central bank is scheduled to convene next week for its latest policy decision, following a rate cut last month, the first in four years.
James added, “While this month’s data may be a setback, recent positive signals about the overall economy suggest that rate cuts will continue to be implemented over the next year.”
