CashNews.co
The UK economy grew by 0.6% in the second quarter of 2024, matching expectations and marking a continued recovery from last year’s recession.
However, monthly GDP growth was flat in June due to poor weather impacting retail sales. Experts warn that challenges remain for sustaining long-term growth, despite the recent strength in the economy.
Peter Arnold, EY UK chief economist, said: “First, retail sales fell significantly, continuing a run of very volatile outturns for the sector. Second, four days of industrial action in the healthcare sector meant that many operations and hospital appointments were cancelled, which dragged on health output. And third, some parts of the services sector had enjoyed a rise in output over the previous couple of months but then saw some payback in June.
“June’s outturn left GDP up 0.6% quarter-on-quarter in Q2, following growth of 0.7% in Q1. The first cut of the expenditure data showed that government consumption was the key driver of GDP growth in Q2. Meanwhile, there was another somewhat underwhelming quarter-on-quarter increase in consumer spending (0.2%).
“Household income data won’t be published until the next release on September 30, but the EY ITEM Club expects real incomes to have grown at a faster rate than the tepid increase in spending, implying a further rise in the household saving ratio.”
Mr Arnold continued: “The prospect of rebounds in health and retail output in July means that Q3 should get off to a reasonable start. Beyond that, the EY ITEM Club expects the economy to continue growing at a decent pace, though it will struggle to sustain the above-trend rates seen in H1 2024.
“Continued solid real income growth and a less cautious attitude from consumers should underpin firmer growth in household spending. However, with the lagged effect of past interest rate rises continuing to emerge, and the government expected to tighten fiscal policy, the EY ITEM Club predicts that GDP growth will be steady rather than spectacular in H2 2024 and 2025.”