UK Economy Sees Zero Growth in July Amid Manufacturing Contraction
The UK economy stagnated in July, failing to register any growth for the first time this year, according to data released by the Office for National Statistics (ONS). The zero growth rate was in line with market expectations following a 0.4 expansion in June.
The contraction in manufacturing output, which declined by 1.3% in July, was the sharpest monthly decline since July last year, according to the ONS. This setback was offset by a 0.4% growth in the service sector over the three months to July, driven by strong performances from the health sector and computer programming services.
"The manufacturing sector has been under pressure for some time now," said Ian Stewart, chief economist at Deloitte. "The decline in output is a concern, but it's worth noting that this is a monthly figure, and we need to look at the bigger picture."
The ONS will now focus on growth over a rolling three-month period, which showed an expansion of 0.2% in the three months to July. This shift in focus acknowledges the volatility of monthly figures.
The government faces increasing 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.
"The UK economy is facing significant headwinds, including a slowdown in global trade and rising interest rates," said Paul Dales, chief economist at Capital Economics. "The government needs to take bold action to stimulate growth and get the economy back on track."
In the Budget, Reeves will have to balance her commitment to fiscal responsibility with the need to boost economic growth. Raising taxes could be a contentious move, but it may be necessary to meet the government's self-imposed rules.
The UK economy has been struggling to regain momentum since the Brexit referendum in 2016. The current stagnation is likely to fuel concerns about the country's long-term prospects and the impact on businesses and consumers.
As the economy enters a critical period, businesses will be watching closely for signs of improvement or further decline. With the Budget just around the corner, the government's decisions will have far-reaching implications for the UK economy.
The ONS data provides a snapshot of the economy in July, but it is only one part of the bigger picture. As the market continues to evolve, businesses and policymakers must stay vigilant and adapt to changing circumstances.
In the short term, the stagnation in economic growth may lead to increased uncertainty among investors and consumers. However, with the Budget on the horizon, there are opportunities for the government to take decisive action and stimulate growth.
The UK economy's performance will be closely watched in the coming months as policymakers navigate the challenges ahead. With the right policies and strategies, the country can regain momentum and achieve sustainable growth.
*Reporting by Bbc.*
