15 August 2024
If you are covering the latest UK GDP data, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
"UK GDP has stayed flat with 0% growth in June, following a sizable 0.4% increase in May. However, this latest data not only reflects the June figures but also confirms that the UK economy grew by 0.6% in Q2 overall, demonstrating a relatively positive set of figures especially in the context of corresponding US and European figures.
"One contributor to growth might have been the Taylor Swift effect, with her Eras tour driving a surge in consumer spending across major cities helping to boost the services sector by 0.8% in the three months to June 2024. However, on the flipside the general election will have played a part in stifling growth as businesses and investors put plans on hold as they waited for the results of the election.
"In a significant move the Bank of England reduced interest rates by 0.25% in August, bringing the base rate down to 5%. This cut should help stimulate more economic growth by making borrowing more affordable for households and businesses. Lower borrowing costs encourage consumer spending on goods and services, while businesses are more likely to invest in expansion, all of which contribute to boosting GDP. Although the effects of this change may take time to fully manifest, it is expected to prove some economic support in the coming months, but further cuts will be needed to truly make an impact.
"Looking ahead, Labour’s first budget, now scheduled for 30th October, will provide further clarity on the government’s fiscal strategy. With expected changes in taxation and public spending, businesses may then gain better visibility. However, it is unlikely that we will see a marked acceleration in GDP in the short term. For now, the economy is expected to continue on its relatively moderate growth path, bolstered by wage growth that remains ahead of inflation and the recent easing of monetary policy."
