Experts: The sudden growth of the British economy will not last long
Experts told CNN that the sudden growth recorded by the British economy in the second quarter of 2023 will not last long. Because of previous hikes in interest rates and their impact on economic activity during the coming quarters of this year.
The report said the British economy expanded slightly in the three months to June 30, driven by strong gains in manufacturing, consumer and government spending.
The Office for National Statistics said gross domestic product rose 0.2% from the previous quarter, beating economists’ expectations of zero growth. In the first quarter, output rose 0.1%.
Darren Morgan, director of the Bureau of Economic Statistics, said falling raw material prices contributed to manufacturing growth, and an increase in hospitality activities helped keep the economy moving, as did government spending on public administration, defense and health.
It’s possible that all-important consumer spending was boosted in June by good weather and a series of live events, Morgan added, based on anecdotal evidence from businesses cited by the Census Bureau.
Jonathan Moyes, head of investment research, said: “The UK is by no means out of the woods, and ‘dismal’ weather in July and August will likely weigh on household spending in the third quarter.
He added that the development of the economy is one of the five priorities of the UK government for this year, which Prime Minister Rishi Sunak set in early January, though he did not specify how much, but the other priority is to halve inflation.
Annual inflation hit 10.5% in December, slowed to 7.9% in June and remained well above the Bank of England’s 2% target. In an effort to tame prices, the central bank continued its campaign to raise rates last week despite the pain those hikes are gradually causing in the some parts of the economy.
Policymakers raised the main cost of borrowing in the UK to 5.25% – the highest level since February 2008.
They noted that previous interest rate hikes are likely to “increasingly impact UK activity and inflation” in the coming quarters. Unlike its G7 peers, the UK economy has not yet returned to pre-pandemic levels.