The UK economy experienced a 0.1 per cent rise in economic activity during August, a figure that defied expectations from many economists who had anticipated a minor contraction. This growth follows increases of 0.4 per cent in both June and July.
Over a three-month comparison period, the British economy has expanded by 0.7 per cent. Looking at the past year, the economy has grown by 2.1 per cent, marking its strongest full year performance since approximately 2017, excluding the pandemic recovery period.
Despite ongoing challenges such as rising taxes, higher energy prices, increased mortgage rates, and a weak labour market, consumer and services spending have also shown an unexpected upward trend this year. Improved productivity, early signs of a tech boom, and an uptick in the manufacturing sector are cited as sources of this resilience.
However, forecasts suggest a potentially different start to 2027. The Bank of England is increasingly likely to raise interest rates at its November meeting, with another 25 basis-point hike expected in early 2027. Additionally, energy bills for households are projected to jump by around 20 per cent in January, which could push inflation to four per cent, double the Bank of England's two per cent target. Wage growth is also expected to slow.