UK economy grows stronger in 2nd quarter, but June data flat

LONDON (Reuters) – The U.K. economy rebounded from a shallow recession last year to record strong growth in the second quarter, but has lost momentum as it enters the second half of 2024, with the Bank of England on track to cut interest rates again. .

Gross domestic product grew by 0.6% in the second quarter of 2024, following a 0.7% expansion in the first quarter, the fastest in more than two years, the Office for National Statistics (ONS) said.

However, in June alone, monthly manufacturing growth slowed to zero from 0.4% in May, as heavy rains affected retail sales and a doctors’ strike caused a 1.5% drop in healthcare activity.

Sterling rose slightly following the data, which did little to change financial markets’ expectations that the Bank of England would cut rates once or twice this year.

Uncertainty ahead of Britain’s July 4 general election – which gave Labor a huge majority after 14 years – may have weighed on growth in June, an economist at RSM UK said.

“Overall, the UK economy performed strongly in the first half of the year, but we need to see signs of confidence in real spending and rising returns to investment to drive growth next year,” he said.

Suren Thiru, director of economics at the Institute of Chartered Accountants in England and Wales, expects quarterly growth to slow as interest rates hit a 16-year high despite the Bank’s rate cut this month.

Wage growth will also moderate and the long-term productivity problem will persist, he said.

Earlier this month, the Bank of England raised its annual growth forecast for 2024 to 1.25% from 0.5%, due to a stronger start to the year and 0.0% quarterly growth expected in the three months to June.

However, the forecast for the outlook for the rest of 2024 was less optimistic, with growth slowing to 0.4% in the third quarter and 0.2% in the final three months of the year – close to the economy’s underlying rate of growth, according to the authority British currency.