The UK ended the second quarter with growth of 0.2%, higher than consensus estimates for flat growth. Despite this support, the British economy continues to lag behind advanced economies without being able to regain pre-pandemic levels.
The 0.5% monthly increase the economy achieved in June contributed to the UK’s growth during the quarter.
“The measures we are taking to combat inflation are starting to work, which means we are laying the solid foundations needed for the economy to grow,” Chancellor Jeremy Hunt said, with the pound rising on the news.
The Bank of England raised interest rates by 25 basis points last week. Governor Andrew Bailey noted that there are “many possible paths” for interest rates that could lead to 2% inflation. “We expect a 25 basis point increase in September, up to 5.50%. After that, we expect a pause until at least the end of 2024,” says Chris Hare, chief economist at HSBC. “This is within the range of interest rate paths the bank may be considering.”
Although the United Kingdom has so far avoided a recession, unlike the eurozone, the numbers confirm its relatively weak development since the beginning of the Covid-19 pandemic.
The British economy is now 0.2% lower than its level at the end of 2019 in the second quarter, compared to 0.2% in Germany, 1.7% in France, 2.2% in Italy, and 6.2% in the United States.
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