The UK economy grew by a lacklustre 0.1% in August, according to official figures from the Office for National Statistics.
Production output grew by 0.4% in August, however it was offset by stagnation across the services sector and a 0.3% drop in construction output.
The ONS also revised its growth data for July, which had initially shown no growth, to a fall of 0.1%.
The downward revision meant real GDP is estimated to have grown by 0.3% in the three months to August compared with the three months to May, a slight increase on the 0.2% recorded in the three months to July.
Danni Hewson, head of financial analysis at AJ Bell, said: “Stuck is the word that the Treasury and Chancellor have consistently used to describe how many people feel about the UK economy.
“The pace of growth has been decelerating, with the pre-tariff front loading surge at the start of the year now a distant memory and the massively important service sector feeling the weight of consumer insecurity.
“The question is how the economy can find a higher gear when consumers are displaying an abundance of caution and businesses are lacking the confidence to move forward.”
Experts warned that Rachel Reeves faces a challenging balancing act ahead of next month’s Autumn Budget.
Lindsay James, investment strategist at Quilter, said: “Today’s GDP figures paint a picture of an economy stumbling to the end of the year after a strong start.
“Markets will have been hoping for signs that the UK can maintain its early-year momentum but it appears that has now dissipated just as we approach a crunch Budget statement from the Chancellor. Rachel Reeves will need to find a tonic and quickly if she is to extricate the economy from its current malaise.”
James also warned that there are a number of obstacles ahead for the economy.
“The IMF confirmed the UK has an inflation problem and is struggling to get out of it. That will continue to put pressure on the consumer. Meanwhile, both businesses and individuals are fearful of what is coming at November’s budget after Rachel Reeves confirmed tax rises are being looked at. Last year showed just how much impact that uncertainty can have on economic growth and now this year appears as if it will be no different.
“If this government is about stimulating growth, then this Budget needs to restore some much-needed confidence in the outlook. Tax rises will continue to act as a heavy anchor on the economy, and anything that adds yet more inflationary pressure should be shelved for another day.”
Luke Bartholomew, deputy chief economist at Aberdeen, added: “The Chancellor may find some modest comfort in the fact that the economy returned to growth in August, but this report does little to shift the outlook for policy or markets. Growth is sluggish and the labour market is still clearly cooling, with private sector wage growth now moderating quite rapidly.
“But with inflation still set to rise further, the Bank of England is very likely to leave interest rates on hold in November. However, significant further rate cuts next year are likely, especially with the budget likely to deliver around £30 billion of fiscal consolidation, which will further weigh on growth and sentiment.”
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