GDP grew by 0.2 per cent in August, but experts have said there is still a debate on whether the UK could avoid sliding into recession.
The latest figures, published by the office for National Statistics (ONS), also showed a 0.3 per cent growth in the three months to August when compared with the three months to May 2023.
Today’s (October 12) figures follow a fall of 0.6 per cent in July 2023, revised down from a 0.5 per cent fall in the body’s previous publication.
The ONS said there was growth in the services sector, with the largest drivers being in professional, scientific and technical activities, and education.
Elsewhere, there was a fall in consumer-facing services of 0.6 per cent with the largest drops in August being in the sports activities and amusement and recreation activities industry.
There was also a large downward contribution from arts, entertainment and recreation, which fell by 7.4 percent in August 2023, following a 6.8 per cent growth in July 2023.
Danni Hewson, head of financial analysis at AJ Bell, said: “The fact that August stormed back from July’s damp and dismal decline is testament to the resilience of the UK economy.
“But despite August’s growth, July’s contraction was worse than had been thought and the disruption from rail strikes in September is already making economists concerned about the next set of figures.
“There’s been a lot of talk of recession and with growth so slim it’s beginning to feel almost inevitable. The full extent of increased borrowing costs has yet to be felt and as temperatures cool and thermostats are eyed warily there’s a real sense that economic resilience is fraying.”
Concerns about the UK going into recession were echoed by Stephen Payne, portfolio manager at Janus Henderson.
“The monthly data is very volatile at the moment, impacted by both weather and strikes. The third quarter overall looks set to be about flat,” he added.
“This data is not really market moving given it was in-line but will on balance probably be mildly reassuring. The debate about whether the UK economy slips into recession or not continues.”
And Hetal Mehta, head of economic research at St. James's Place, said despite the rise it is still clear the “economy remains weak”.
She said: “Monthly GDP has trundled sideways since the beginning of 2022 and the full effect of the Bank of England’s rate increases is yet to feed through.
“Credit conditions have been tightening and some softening in the UK labour market is evident – these will most likely keep the UK economy on a weak footing in the months ahead."
John Glencross, CEO and co-founder of Calculus, said the rise signals a “positive trajectory and inspires confidence in the UK economy for investors and SMEs alike”.
While Richard Carter, head of fixed interest research at Quilter Cheviot, said: “This morning’s UK GDP figure provides another small glimmer of hope that the UK could scrape through and avoid a recession.”
“The economy may be holding up for now, but whether or not the UK truly manages to avoid a recession is yet to be seen. The speed of interest rate rises and the impact of the cost-of-living crisis may mean the pain is simply delayed, and 2024 could prove considerably more difficult.”
tara.o'connor@ft.com
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