The UK economy has delivered its strongest quarterly performance in over two years, growing by 0.4% between April and June 2024 according to the latest Office for National Statistics data. This robust expansion marks a significant acceleration from the 0.2% growth recorded in the first quarter and represents the fastest pace of growth since the final quarter of 2021.
Services Sector Powers Economic Revival
The dominant services sector emerged as the primary engine of growth, expanding by 0.5% during the quarter. This crucial sector, which accounts for nearly 80% of the UK's economic output, showed resilience across multiple industries including retail, hospitality, and professional services.
Production Industries Show Surprising Strength
In a welcome development, production industries grew by 0.6%, with manufacturing output increasing by 0.4%. This represents a notable turnaround for the sector, which had been struggling with supply chain challenges and elevated costs throughout much of the previous year.
Construction Sector Faces Headwinds
While most sectors showed positive momentum, construction output declined by 0.9% during the quarter. The drop reflects ongoing challenges in the housing market and broader construction industry, though some analysts suggest this could be temporary given the overall economic improvement.
Monthly Performance Shows Consistent Growth
The quarterly strength was supported by solid monthly performances, with the economy growing by 0.2% in June alone. This followed an impressive 0.4% expansion in May and a flat reading in April, indicating building momentum as the quarter progressed.
What This Means for the UK's Economic Outlook
This stronger-than-expected performance provides several key insights:
- Recession fears recede: The robust growth makes a near-term recession increasingly unlikely
- Consumer confidence improving: The services growth suggests households are becoming more willing to spend
- Interest rate implications: The strong data may influence the Bank of England's timing on potential rate cuts
- Political significance: The figures arrive at a crucial time for economic policy discussions
Economists are now revising their full-year growth forecasts upward, with many suggesting the UK could outperform earlier pessimistic projections. However, challenges remain, including persistent inflation in some sectors and global economic uncertainties.
The second quarter performance demonstrates that the UK economy is building meaningful momentum, potentially marking a turning point after the stagnation that characterized much of 2023 and early 2024.
