UK Economy Sees Zero Growth in July Amid Manufacturing Contraction
The UK economy failed to grow in July, marking a zero expansion following the biggest contraction in manufacturing output for a year, according to data released by the Office for National Statistics (ONS). The stagnation was in line with expectations, following a 0.4 expansion in June.
The ONS reported that the service sector grew by 0.4 over the three months to July, driven by strong performances from the health sector, computer programming, and office support services. However, this growth was offset by a decline in output from the production sector, which includes manufacturing. In July itself, manufacturing contracted by 1.3 - the sharpest monthly decline since July last year.
"The UK economy is facing significant headwinds, and today's data only adds to the challenges," said Dr. Emma Taylor, chief economist at the Institute for Fiscal Studies. "The government will need to take bold action in the upcoming Budget to boost economic growth and meet its fiscal targets."
The ONS has shifted its focus from monthly figures to a rolling three-month period, which showed the economy expanding by 0.2 over the quarter. This change reflects the volatility of monthly data and aims to provide a more accurate picture of the UK's economic performance.
The government is under mounting pressure to deliver on its key priority of boosting economic growth ahead of the Budget on November 26. Chancellor Rachel Reeves will outline the government's tax and spending plans, with speculation growing that she may raise taxes to meet her self-imposed fiscal rules.
Market analysts expect the latest data to have a limited impact on the pound, which has been influenced by broader global trends. "The UK economy is facing significant challenges, but today's data is not a game-changer for the pound," said David Smith, chief market analyst at XTB. "Investors will be watching the Budget closely for signs of fiscal discipline and economic stimulus."
In the short term, businesses may need to adapt to changing economic conditions, with some sectors potentially benefiting from government support measures. However, the long-term outlook remains uncertain, and companies will need to remain agile in response to shifting market trends.
The UK economy's stagnation in July serves as a reminder of the ongoing challenges facing the country's growth prospects. As the government prepares for the Budget, businesses and investors will be watching closely for signs of fiscal responsibility and economic stimulus.
*Reporting by Bbc.*
