The UK’s real gross domestic product (GDP) has seen modest growth in the second quarter of 2023 (April to June), with an increase of 0.2%, according to the first quarterly estimate published today (11th August 2023).
Monthly figures reveal that GDP grew by 0.5% in June 2023, rebounding from an unrevised fall of 0.1% in May 2023, and following growth of 0.2% in April 2023. The economy is still 0.2% below its pre-coronavirus level in Quarter 4 (October to December) 2019. When compared to the same quarter a year ago, GDP is estimated to have risen by 0.4%.
In terms of output, the growth was led by the services sector, which saw a modest increase of 0.1% on the quarter. This was driven by advances in information and communication, accommodation and food service activities, and human health and social work activities. The production sector also made a notable contribution with growth of 0.7%, fueled by 1.6% growth in manufacturing.
On the expenditure side, robust growth in household consumption and government spending marked the quarter. However, these gains were partially offset by a decline in international trade flows during the same period.
Inflation indicators showed that the implied GDP deflator rose by 6.7% compared with the same quarter last year, following growth of 6.5% in the previous quarter. This largely mirrors a decrease in the implied price of imports, a factor that positively impacts the GDP deflator.
It’s worth noting that the coronation of King Charles III on 6th May 2023, which led to an additional bank holiday on Monday 8th May, did not have its impact removed from the seasonally adjusted estimates.
Reaction
Stephen Perkins, managing director at Norwich-based Yellow Brick Mortgages:
“Positive news for those hoping there’s life on Mars, as this data shows that even in poisoned soil something can grow, albeit only slightly. Despite the Government and Bank of England’s best efforts to destroy the UK economy, we are still above the brink of recession. However, this data for the second quarter and June came before the impact of yet more needless rate rises, so is not a true reflection of the economy today.”
Riz Malik, director of Southend-on-Sea-based independent mortgage broker, R3 Mortgages:
“The GDP figures are encouraging and surpass expectations. Let’s just hope the Bank of England doesn’t consider the growth too rapid and use it as a pretext for more rate hikes. While it’s challenging to get overly enthusiastic about growth numbers beginning with a zero, it underscores the resilience of the UK economy. Hopefully, the inflation data on the 16th will also exceed expectations.”
Graham Cox, founder of the Bristol-based broker, SelfEmployedMortgageHub.com:
“The UK economy is proving surprisingly resilient in the face of huge economic headwinds. The 0.5% GDP growth in June is particularly striking, though the fine weather probably played a part in helping to boost hospitality and retail sales. The acid test will be the second half of the year, as the recent steep interest rate rises really start to bite.”
Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial:
“Comparing the UK to other major economies is akin to expecting her to run a marathon and ignoring the fact she’s recently had a heart attack. Brexit was a heart-stopper for UK plc and it will take some time until she reacts to the defib. Combine that with the shambolic government and lack of direction on growth and investment and you create an environment no business would want to settle in.”
Jonathan Moyes, head of investment research, Wealth Club
“It was pleasing to see the UK produce a more upbeat 0.5% for June, this was much stronger than consensus forecasts, which called for around 0.2% growth. On a quarterly basis, the economy remains in the slow lane, with GDP up 0.2%. This is the sixth quarter in a row where growth was 0.2% or less.
“The UK is by no means out of the woods. June’s hot weather flattered the growth figures, this get out of jail free card will only be played the once. A dismal July and August is likely to weigh on consumer spending for Q3. Add to this the UK’s dominant services sector showing signs of slowing, and it is a challenge to reconcile how the U.K. economy can escape a recession after such a steep rise in interest rates.
“However, forecasters have long predicted a recession that has yet to arrive. The economy may continue to find a way to muddle through. News of wage growth surpassing inflation for the second half of the year May provide the confidence the economy needs to avoid falling into recession.”
