The UK economy unexpectedly grew in August, defying economist expectations of a 0.1% contraction.
Official figures from the Office for National Statistics showed the economy grew by 0.1% in August, driven by a 0.8% growth in production.
Services showed no growth during August, while construction output fell by 0.2%.
Compared with the same month a year ago, the ONS said GDP is estimated to be 2.1% higher.
On a quarterly basis, the economy grew by 0.7% in the three months to August, ahead of forecasts. It marked the eighth consecutive three-month on three-month growth.
However, industry commentators warned that the UK may face further obstacles going forward.
Jonathan Raymond, investment manager at Quilter Cheviot, said: “The economic environment for next year continues to look challenging, with growth forecasts cut as a result, while the deficit reduction requires some difficult spending decisions to be made from 2028, something the new government will not likely want to be implementing.
“Higher energy costs and interest rates, alongside elevated inflation, will weigh on confidence going into 2027.”
Danni Hewson, head of financial analysis at AJ Bell, commented: “When you consider the global backdrop, the fact that the UK has demonstrated such resilience does give the chancellor something to build upon with his first Budget. But the momentum that had grown over the long hot summer of sport has faltered and the dominant service sector has begun to buckle under the pressure of rising prices and consumer caution.
“Whilst the UK economy has held firm against its doubters, it remains vulnerable, and the coming months are likely to prove taxing.”
Derrick Dunne, CEO of YOU Asset Management, said all eyes will be on the upcoming Budget.
“Chief among concerns now will be what the Budget at the end of the month contains. Significant tax and spending increases would put further pressure on government bond yields. Markets will be looking for restraint from Chancellor Healey’s first major update.
“A step in the wrong direction, as we have seen in recent times, will be quickly punished. The economy might be surprising to the upside but confidence is very thin. A bad Budget could have profound consequences given where we are with inflation and interest rates.”
Main image: korpa-AaroEjVmkqs-unsplash
