UK economic system information better-than-expected progress in second quarter of 2023

The UK recorded better-than-expected progress within the second quarter of the 12 months, with document temperatures in June boosting summer season spending in pubs and eating places to assist the economic system to keep away from a recession.

Official figures confirmed that financial output rose by 0.2 per cent within the three months to June, exceeding economists’ consensus forecasts of a stagnant quarter. The economic system accelerated within the second quarter after recording progress of 0.1 per cent in the beginning of the 12 months.

The sturdy second-quarter efficiency was all the way down to a powerful June, the place output rose by 0.5 per cent, larger than the 0.2 per cent forecast by economists. The economic system shrank by 0.1 per cent in Might and grew by 0.2 per cent in April.

The Workplace for Nationwide Statistics (ONS) mentioned the nation’s struggling manufacturing sector had skilled a modest rebound within the second quarter, with exercise up by 1.6 per cent on the again of rising gross sales of vehicles and different motor automobiles. The providers sector, which had been the primary engine powering progress this 12 months, expanded solely 0.1 per cent.

Darren Morgan, director of statistics on the ONS, mentioned: “The economic system bounced again from the consequences of Might’s additional financial institution vacation to document sturdy progress in June. Manufacturing noticed a very sturdy month with each vehicles and the often-erratic pharmaceutical trade seeing notably buoyant progress.

“Companies additionally had a powerful month with publishing and automotive gross sales and authorized providers all doing effectively, although this was partially offset by falls in well being, which was hit by additional strike motion. Building additionally grew strongly, as did pubs and eating places, each aided by the new climate.”

Commerce was the most important drag on progress within the second quarter, with exports down 0.8 per cent. Family spending and authorities expenditure rose by 0.5 per cent and 0.7 per cent respectively.

The expansion efficiency was the perfect because the begin of 2022, when output rose by 0.5 per cent between January and March in a interval that included Russia’s invasion of Ukraine.

The UK’s second-quarter efficiency compares to a mean progress price of 0.3 per cent within the 20-country eurozone, 0 per cent in Germany and a fall of 0.3 per cent in Italy between March and June.

The Financial institution of England mentioned final week that it anticipated annual progress of 0.5 per cent this 12 months and subsequent, a modest efficiency that may assist the economic system to dodge a recession. Financial output has slowed on account of quickly rising rates of interest, that are designed to make borrowing dearer and pressure companies and households to chop again on their spending.

The Financial institution thinks the economic system will register a progress price of 0.25 per cent in 2025 because the affect of upper rates of interest is felt throughout the economic system and borrowing prices might be held at excessive ranges for a chronic interval.

Jeremy Hunt, the chancellor, mentioned: “The Financial institution of England at the moment are forecasting that we’ll keep away from recession and if we persist with our plan to assist folks into work and enhance enterprise funding the IMF [International Monetary Fund] have mentioned over the long run we’ll develop quicker than Germany, France and Italy.”

Ed Monk, at Constancy Worldwide, mentioned : “The nice British shopper is proving remarkably resilient and helps the economic system keep away from falling into recession, for now not less than.”

Ruth Gregory, deputy chief UK economist at Capital Economics, was extra circumspect and didn’t count on the resurgence in exercise to final. She mentioned: “With a lot of the drag from larger rates of interest nonetheless to come back, we’re sticking to our below-consensus forecast that the UK is heading for a light recession later this 12 months.”

Commenting on these new figures, Marco Forgione, Director Normal of the Institute of Export and Worldwide Commerce, says: “Immediately’s statistics reveal the constructive affect that worldwide commerce can have on the economic system. However clearly extra work nonetheless must be executed to assist companies in attaining sustainable, long-term progress. It’s encouraging to see a slight uptick in manufacturing exports in June with a rise in equipment and transport contributing to this rise.

“Immediately’s numbers illustrate how exporting generally is a catalyst for restoration and new alternatives. It’s good to see indicators that UK corporations need to create new alternatives additional afield. There was a notable improve in corporations exporting to the likes of Argentina, Canada, Malaysia and New Zealand within the second quarter of this 12 months.

“It’s vital that we get extra companies buying and selling internationally and for the UK to be seen as a sexy choice for inward funding, if we’re to deal with the cost-of-living disaster and to provide actual financial progress.

“Now could be the time for companies to be exploring how they’ll develop and succeed by means of worldwide commerce. The Institute of Export & Worldwide Commerce is right here to assist and advise corporations who haven’t exported earlier than, or those that wish to broaden their horizons.”