Economy not out the woods despite bigger-than-expected jump in June, experts say
June’s GDP data might spur the Bank of England to hike interest rates further, one expert warned.
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.A surprise bounce in gross domestic product (GDP) will not mean much for hard-pressed families and businesses and could even lead to interest rates being hiked further, experts warned on Friday.
Several experts said that while on the face of it the 0.5% rise in GDP in June was cause for celebration, the unexpectedly high figure could also bring consequences.
Economists had expected growth to be just 0.2% in June, according to a consensus supplied by Pantheon Macroeconomics.
This underwhelming rebound in quarterly UK GDP highlights the worrying fragility in our economy
“The better-than-expected GDP figures are likely to galvanise the Bank of England’s zeal to continue to raise interest rates,” said David Baker, a partner at audit giant Mazars.
“The Bank will remain very concerned about the persistence of inflation and will reflect on near full employment and high wage inflation as reasons to keep policy tight, despite higher mortgage rates denting consumer confidence and business surveys still pointing to lacklustre future growth.”
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, called the growth “underwhelming”.
He said that the rise in June was just a rebound from May, when the coronation gave people an extra day off, rather than being a “meaningful improvement”.
“This underwhelming rebound in quarterly UK GDP highlights the worrying fragility in our economy as inflation, higher interest rates and waning customer demand weigh on activity,” he said.
“While GDP bounced back strongly in June, this reflects more the reversal of the squeeze on output from the extra bank holiday in May, rather than a meaningful improvement in our growth trajectory.”
Small movements in one direction or the other won’t mean much for many firms facing the toughest trading conditions in years
Mr Thiru warned that the UK is entering a “more challenging period” where inflation remains stubborn and interest rates high.
“GDP is likely to weaken considerably in the third quarter, despite a boost from lower energy bills,” he said.
David Bharier, head of research at the British Chambers of Commerce, said: “While the UK remains on course to avoid a technical recession, small movements in one direction or the other won’t mean much for many firms facing the toughest trading conditions in years.
“UK businesses are very adaptable, but they are looking for clear direction from the Government and the Bank of England, particularly on interest rate policy and a long-term plan to unlock investment.”