Monday 9 September 2019 10:37 am

UK economy shakes off recession fears with growth in July

The UK economy grew by more than expected in July, official figures have shown, allaying fears that Britain could be heading for a recession.

Read more: Into the red: UK economy shrinks for first time in seven years

British GDP expanded by 0.3 per cent month on month in July, after stagnating in June. Economists were expecting just 0.1 per cent growth.

The better-than-expected figures will lift worries that the UK economy is teetering on the edge of a recession after it shrank by 0.2 per cent in the second quarter.

Brexit uncertainty and a global economic slowdown driven by the US-China trade war have damaged British growth.

But in July, the services, manufacturing and construction sectors all grew after stagnating or shrinking in June.

The pound strengthened following the news, rising 0.5 per cent against the dollar to $1.234. A stronger pound tipped the FTSE 100 into negative territory. It had fallen 0.1 per cent by 10.15am.

“The pick-up in GDP in July is a reassuring sign that the economy is on course to grow at a solid – perhaps even above-trend – rate in the third quarter,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

The all-important services sector, which makes up about 80 per cent of the UK economy, grew by 0.3 per cent.

Yet the relatively large services growth followed four consecutive months of stagnation in the sector.

Rob Kent-Smith, head of GDP at the ONS, said: “While the largest part of the economy, the services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019.”

In the three months to July, the UK economy stagnated, the Office for National Statistics (ONS) said. This was nonetheless above expectations of a 0.1 per cent fall.

“GDP growth was flat in the latest three months, with falls in construction and manufacturing,” Kent-Smith said.

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Tombs said: “Manufacturing output should grow at a faster rate later in the third quarter, given that firms should add to their stockpiles at a faster rate as the Brexit deadline [31 October] approaches, and given that most car plants didn’t shut as usual for maintenance in August.”

(Image credit: Getty)