British GDP growth grinds to halt in August

Jasper Jolly
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After a stronger start growth stagnated in the late summer, early estimates suggest (Source: Getty)

The British economy did not grow appreciably in August, according to early estimates, after a performance earlier in the summer which was stronger than previously thought.

GDP growth for the month came in at zero per cent, the Office for National Statistics (ONS) said. That followed upwardly revised readings of 0.2 per cent growth in June and 0.4 per cent in July.

The rolling three-month growth rate – the less volatile measure preferred by economists – came in at 0.7 per cent because of the earlier upgrades, leaving it unchanged month-on-month and still pointing to the best calendar quarter in almost two years between July and September.

The three-month trend data shows a varied performance by the UK economy in the past year, with output actually falling in February to April, as the "Beast from the East" storms froze activity, before snapping back over the summer.

"Overall, the pattern of UK growth this year has been heavily affected by the weather," said John Hawksworth, chief economist at PwC. "But aside from these seasonal variations, the underlying trend is for moderate UK growth at a rate of around 1.5 per cent per annum. This is somewhat below its longer term trend rate of around two per cent and reflects the continued drag on business investment in particular from Brexit-related uncertainty."

The services sector grew by 1.6 per cent in June to August compared with the same period last year, which the ONS described as "subdued". Services account for around four-fifths of the British economy's output, and were responsible for the lion's share, 0.42 percentage points, of growth from June to August.

Nevertheless, the early monthly reading – known to be volatile because of a relative lack of hard data – came in lower than expected by economists' consensus expectations of 0.1 per cent. Both manufacturing and construction output for the month fell, while the services sector was broadly flat.

Jacob Nell and Bruna Skarica, economists at Morgan Stanley, described the August data as a "small downside miss", and said growth could come in above the Bank of England's latest forecasts for the third quarter because of the earlier revisions.

"With upside risks to the MPC's third-quarter 0.4 per cent forecast, recent stronger-than-expected inflation prints and robust labour market data, we think the MPC's message next month will be hawkish," they said.