Source: Sharecast
According to the Office for National Statistics, real gross domestic product ticked up 0.1% in August, a slowdown on July's 0.4% expansion, and by 0.7% over the three months. Consensus had been for the economy to shrink by 0.1% month-on-month, however, and to grow by a more modest 0.5% in the three months to August.
The biggest month-on-month growth was seen in production. The sector reported growth of 0.8%, in comparison to no growth in services and a 0.2% contraction in construction.
However, the UK’s dominant services sector drove the quarterly growth, despite the tepid August showing, after particularly strong performances in June and July. Overall, the services sector expanded by 0.9% in June to August, and helped offset a 0.2% softening in production and a 1.0% slide in construction.
The three-month print is regarded as a less volatile measure than the monthly data.
Liz McKeown, director of economic statistics at the ONS, said: "Upward revisions to already strong services growth in June and July helped drive robust growth across the three months, despite services showing no growth in August.
"Computer programming was once against the largest contributor to growth in the three months to August. Looking at the longer-term picture, compared with the same three-month period a year ago, the increased strength now seen in services is evident not just in computer programming but across a range of business-facing industries, including legal services, research and development, and advertising."
The update comes ahead of John Healey’s first Budget on 28 October. The chancellor is expected to lay out plans to address soaring borrowing costs, high government spending and a spike in the cost of living on the back of war in the Middle East.
The Bank of England has so far left interest rates on hold this year, at 3.75%, but with inflation ticking higher, most economists believe its next move will be a hike.
Ben Jones, senior lead economist at the Confederation of British Industry, said: "The economy has generally performed well so far this year. But amid rising inflation and tightening financial conditions, maintaining that momentum does look difficult, with a more subdued end to 2026 in prospect."
Danni Hewson, AJ Bell's head of financial analysis, said: “When you consider the global backdrop, the fact the UK has demonstrated such resilience does give the chancellor something to build upon. But the momentum that had grown over the long hot summer of sport has faltered, and the service sector has begun to buckle under the pressure of rising prices and consumer caution.”
Susannah Streeter, chief investment strategist at Wealth Club, said: “Even if the UK flatlines going forward, growth looks set to beat even the upgraded forecast of 1.3% from the International Monetary Fund, which was released this week. But there could be a sting in the tail: the higher energy costs risk becoming more embedded in the economy and force interest rates higher, putting the brakes on growth more sharply next year.”