The UK recorded better-than-expected growth in the second quarter of the year, with record temperatures in June boosting summer spending in pubs and restaurants to help the economy to avoid a recession.
Official figures showed that economic output rose by 0.2 per cent in the three months to June, exceeding economists’ consensus forecasts of a stagnant quarter. The economy accelerated in the second quarter after recording growth of 0.1 per cent at the start of the year.
The robust second-quarter performance was down to a strong June, where output rose by 0.5 per cent, higher than the 0.2 per cent forecast by economists. The economy shrank by 0.1 per cent in May and grew by 0.2 per cent in April.
The Office for National Statistics (ONS) said the country’s struggling manufacturing sector had experienced a modest rebound in the second quarter, with activity up by 1.6 per cent on the back of rising sales of cars and other motor vehicles. The services sector, which had been the main engine powering growth this year, expanded only 0.1 per cent.
Darren Morgan, director of statistics at the ONS, said: “The economy bounced back from the effects of May’s extra bank holiday to record strong growth in June. Manufacturing saw a particularly strong month with both cars and the often-erratic pharmaceutical industry seeing particularly buoyant growth.
“Services also had a strong month with publishing and car sales and legal services all doing well, though this was partially offset by falls in health, which was hit by further strike action. Construction also grew strongly, as did pubs and restaurants, both aided by the hot weather.”
Trade was the biggest drag on growth in the second quarter, with exports down 0.8 per cent. Household spending and government expenditure rose by 0.5 per cent and 0.7 per cent respectively.
The growth performance was the best since the start of 2022, when output rose by 0.5 per cent between January and March in a period that included Russia’s invasion of Ukraine.
The UK’s second-quarter performance compares to an average growth rate of 0.3 per cent in the 20-country eurozone, 0 per cent in Germany and a fall of 0.3 per cent in Italy between March and June.
The Bank of England said last week that it expected annual growth of 0.5 per cent this year and next, a modest performance that will help the economy to dodge a recession. Economic output has slowed as a result of rapidly rising interest rates, which are designed to make borrowing more expensive and force businesses and households to cut back on their spending.
The Bank thinks the economy will register a growth rate of 0.25 per cent in 2025 as the impact of higher interest rates is felt across the economy and borrowing costs could be held at high levels for a prolonged period.
Jeremy Hunt, the chancellor, said: “The Bank of England are now forecasting that we will avoid recession and if we stick to our plan to help people into work and boost business investment the IMF [International Monetary Fund] have said over the longer term we will grow faster than Germany, France and Italy.”
Ed Monk, at Fidelity International, said : “The great British consumer is proving remarkably resilient and is helping the economy avoid falling into recession, for now at least.”
Ruth Gregory, deputy chief UK economist at Capital Economics, was more circumspect and did not expect the resurgence in activity to last. She said: “With much of the drag from higher interest rates still to come, we are sticking to our below-consensus forecast that the UK is heading for a mild recession later this year.”
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UK economy records better-than-expected growth in second quarter of 2023