UK economy beats forecasts with 0.1% August growth

what happened

The Office for National Statistics said on Thursday that Britain's real gross domestic product edged up 0.1% in August. That was slower than July's 0.4% expansion but better than expected, since a Reuters poll of economists had mostly pointed to a 0.1% monthly contraction, sharecast.com reported.

Over the three months to August, output rose 0.7%, compared with a consensus of 0.5%. Production was the strongest sector in August with a gain of 0.8%, while services were flat and construction fell 0.2%. Looking at June to August as a whole, services grew 0.9%, offsetting a 0.2% decline in production and a 1.0% drop in construction.

The release comes ahead of Chancellor John Healey's first Budget on 28 October. He is expected to set out measures to deal with costly borrowing, heavy government spending and a rise in living costs linked to the war in the Middle East. The Bank of England has kept rates at 3.75% so far this year, and most economists now expect its next move to be a hike as inflation picks up.

why it matters

Two points matter for markets. Quarterly growth was driven mainly by services, while the weak August reading points to a slowdown. The CBI warns that rising inflation and tighter financial conditions could make the end of 2026 more subdued, so sterling, gilts and rate expectations are likely to stay sensitive to incoming data.

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