UK economic growth revised up, but pound on track for worst month in a year – business live

Despite Jeremy Hunt’s optimism, Capital Economics’ deputy chief UK economist, Ruth Gregory, argues that overall, today’s release changes very little.

She told clients this morning:

The final Q2 2023 GDP data release shows that the economy was a bit more resilient in the first half of this year than we previously thought. But other indicators suggest this is now fading. We still think that higher interest rates will trigger a mild recession involving a 0.5% fall in GDP in the coming quarters.

The data leaves the economy still only 0.6% above its level a year ago, Gregory points out, adding:

It does not change the big picture that the economy has lagged behind all other G7 countries aside from Germany and France since the pandemic. And that’s before the full drag from higher interest rates has been felt.

Chancellor of the Exchequer Jeremy Hunt has hailed the news that the UK has grown faster than Germany and France since 2020.

He’s also repeated a recent theme that the ‘doubters’ are being proved wrong by the latest upward revision to UK economic data, saying:

“We know that the British economy recovered faster from the pandemic than anyone previously thought and data out today once again proves the doubters wrong.

We were among the fastest countries in the G7 to recover from the pandemic and since 2020 we have grown faster than France and Germany.

“The best way to continue this growth is to stick to our plan to halve inflation this year, with the IMF forecasting that we will grow more than Germany, France, and Italy in the longer term.”

The UK economy’s recovery from the Covid-19 pandemic has been faster than previously thought, today’s updated GDP data shows.

UK GDP is now estimated to be 1.8% above pre-pandemic levels by the second quarter of this year, the Office for National Statistics reports.

That’s a stronger recovery than Germany (whose economy is 0.2% larger than in Q4 2029) and France (1.7% larger).

But, it still leaves the UK behind the US, Canada, Italy and Japan, as the table at 7.48am shows).

Back in August, the ONS thought the UK economy was still 0.2% smaller than its pre-pandemic levels.

This will cheer the government, as ministers prepare to head to Manchester for the Conservative party conference.

Bloomberg says:

The UK economy is larger than previously thought, new figures show in a boost for Prime Minister Rishi Sunak days before his Conservative Party begins its annual conference.

The upward revision announced by the Office for National Statistics Friday means Britain is no longer lagging every other major industrial nation in its recovery from the pandemic. Germany and France now is at the bottom, with the UK third to last.

Britain’s economy has grown faster than previously thought this year, new data just released by the Office for National Statistics shows.

The latest UK GDP quarterly national accounts shows that the economy grew faster than expected at the start of this year.

UK GDP is now estimated to have increased by 0.3% in the January-March quarter, the ONS says, up from an earlier estimate of just 0.1% growth.

Growth was also faster than expected last year, GDP is now estimated to have increased by 4.3% in 2022, revised from a first estimate of 4.1%.

Q2’s data was unrevised, though – still showing 0.2% growth.

These changes follow earlier revisions from the ONS at the end of August, which showed the UK economy shrank less and bounced back faster during the pandemic.

ONS chief economist Grant Fitzner says:

“Today’s latest figures show the GDP growth rate is almost unrevised over the last 18 months.

“Our new estimates indicate a stronger performance for professional and scientific businesses due to improved data sources.

“Meanwhile, healthcare grew less because of new near real-time information showing the cost of delivering services.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The pound is heading towards its worst month since the turmoil of last year’s mini-budget, amid hopes that UK interest rates may have peaked, and fears that a recession could be looming.

With just one trading day to go, September has been a poor month for sterling. The currency has shed four and a half cents against the US dollar, or 3.5%, this month to just over $1.22 this morning.

That would be the worst performance in 12 months, since panic over Liz Truss’s plan for unfunded tax cuts a year ago sent sterling reeling to a record low.

So what has caused the pound’s weakness, sending it to a six-month low this week.

One reason is concerns that the UK economy could stagnate, or worse, in the coming months, with the eurozone economy also appearing to weaken.

Matthew Ryan, head of market strategy at global financial services firm Ebury, explains:

“Both the euro and sterling have slumped to six-month lows on the US dollar this week. While the moves can be largely attributed to a strong greenback, both currencies are currently underperforming their G10 counterparts. Aside from valuation, concerns over the state of both economies have contributed to the sell-offs.

Economic news out of the UK, in particular, has turned decidedly bleak in recent weeks. Last week’s business activity PMIs and retail sales reports both missed economists’ expectations, and Citigroup’s UK economic surprise index is now teetering just above the level of 0, and its lowest level since March.

Another factor is a repricing of interest rate expectations. With inflation falling in July and August, the Bank of England is no longer expected to raise borrowing costs several more times. UK interest rates may even have peaked.

But across the Atlantic, the Federal Reserve is expected to push US interest rates higher before the end of the year, and keep them higher for longer than previously expected.

That ‘higher for longer’ theme has dominated markets this month, sending the US dollar to 10-month highs against a basket of currencies, and weakening government bond prices.

September is often a weak month for equities, and so far this month the US S&P 500 index is down almost 5%, while the tech-focused Nasdaq has lost 6%.

Britain’s FTSE 100 is up 2%, partly lifted by energy companies as the oil has also risen this month.

The agenda

• 7am BST: UK Q2 GDP (final estimate) and economic accounts

• 9.30am BST: UK mortgage approvals figures for August

• 10am BST: Eurozone inflation flash estimate for September

• 1.30pm BST: US PCE measure of inflation