UK Economy Surprises with Growth in Q2 2023

The UK economy experienced an unexpected growth in the second quarter of 2023, despite several challenges such as strikes, an extra bank holiday, and persistently high inflation. According to the Office for National Statistics, gross domestic product (GDP) expanded by 0.2% from April to June, following a 0.1% growth in the previous quarter. This positive result surpassed the predictions of economists polled by The Wall Street Journal.

Many economists had anticipated stagnation during this period due to reduced activity caused by public-sector strikes and the additional bank holiday in May for the coronation of King Charles. However, the services sector, which is crucial for the British economy, grew by 0.1% in the quarter. Additionally, industrial production output witnessed growth of 0.7%, with manufacturing expanding by 1.6% and construction by 0.3%.

Furthermore, household expenditure increased during the three months, accompanied by higher government spending, according to the ONS. Nevertheless, consumers continue to face the impact of high inflation, which stood at 7.9% in June, ranking among the highest in western Europe. The recent rise in the Bank of England's key rate to 5.25% has further constrained spending.

Although the UK economy rebounded by 0.5% in June, following a contraction in May, the quarterly GDP for the three-month period ending in June remained 0.2% smaller than its pre-pandemic level in the final quarter of 2019, as reported by the ONS.