\nEconomists still expect next rate cut in November<\/h2>\n<\/header>\n Markets see a near-25% chance of an interest rate cut next week.<\/p>\n
Some economists (e.g. Capital Economics) say today\u2019s disappointing GDP data make a rate cut then a bit more likely, but overall economists still think November is more likely.<\/p>\n
Thomas Pugh<\/strong>, UK economist at RSM UK, said:<\/p>\n\nTurning to the budget on 30 October, he said:<\/p>\n
\nThe weakness in GDP was concentrated in the manufacturing sector, which fell by 1% m\/m. Manufacturing is struggling globally, as surging exports from China, combined with weak global demand, especially for goods, weighs on production. Construction also dropped by 0.4% m\/m as a wet July hampered construction efforts.<\/p>\n<\/blockquote>\nShareUpdated at\u00a008.18 BST<\/time><\/p>\n<\/footer>\n<\/article>\n\n\nThe 0.1% rise in service sector output in July was driven by retail sales rebounding and fewer strike days, although economists had expected a 0.2% rise.<\/strong> Rob Wood<\/strong>, chief UK economist at Pantheon Macroeconomics, has crunched the numbers.<\/p>\nWholesale and retail output gained by 0.5%. Health and social work also rose by 0.5%, recovering half of the ground lost in June as junior doctors were on strike for two days in July compared to three in June. With no further doctors strikes planned, healthcare output is expected to jump again in August.<\/p>\n
Accommodation and food services did better than expected, rising by 0.9% month-to-month, stronger than the soft industry surveys had signalled.<\/p>\n
The downside surprise in services came in the powerhouse professional services sector, where output dropped by 1.3%. Wood said:<\/p>\n
\nShare\n\nIsaac Stell<\/strong>, investment manager at the Wealth Club, said:<\/p>\n\nThe usual bright spot was the bounce back in growth for the services sector with the health sector one of the leading contributors, springing back to life following strike action in June.<\/p>\n
A notable slowdown in advertising and architects may be indicative of a wider slowdown. With the canaries beginning to look a bit peaky, the chancellor may need to tread more carefully in October.<\/p>\n<\/blockquote>\nShare\n\nA September interest rate cut is not certain despite the downbeat GDP data, said Suren Thiru<\/strong>, economics director at the Institute of Chartered Accountants in England and Wales. He explained:<\/p>\n\nThe UK\u2019s growth trajectory should slow further in the coming months with higher energy bills and expected tax rises likely to trigger renewed restraint in spending and investment, despite a boost from subdued inflation.<\/p>\n
Despite these downbeat figures, a September rate cut is not certain given that some rate setters are still sufficiently nervous over lingering price pressures to delay loosening policy again, at least until November.<\/strong><\/p>\n<\/blockquote>\nShare\n\n\u201cThe July GDP print was disappointing: despite the modest boost from the Euros, the UK saw broad-based weakness across the economy,\u201d said Sanjay Raja<\/strong>, chief UK economist at Deutsche Bank.<\/p>\n\nThe economy grew by 0.7% in the first three months of the year, followed by a 0.6% expansion in the second quarter but the latest ONS figures suggest the recovery from the mild recession in late 2023 has lost steam.<\/strong><\/p>\nShare\n\nEconomists say this does not mean that the UK will slip back into recession.<\/strong><\/p>\nRuth Gregory,<\/strong> deputy chief UK economist at Capital Economics, said:<\/p>\n\nWe still think a mild slowdown in GDP growth to more normal rates of 0.3% quarter-on-quarter later this year is more likely than a sudden drop back into recession.<\/p>\n
For now, we are sticking to our view that the Bank of England will keep interest rates unchanged in September before cutting rates again in November. But today\u2019s data has made an interest rate cut next Thursday a bit more likely.<\/strong><\/p>\n<\/blockquote>\nShareUpdated at\u00a007.44 BST<\/time><\/p>\n<\/footer>\n<\/article>\n\n\nLuke Bartholomew, <\/strong>deputy chief economist at abrdn, said:<\/p>\n\nAs ever, though, monthly activity numbers are very volatile month to month, often reflecting more noise than signal. The broader trend remains solid, although it is likely that the underlying pace of growth will slow somewhat over the second half of the year.<\/strong><\/p>\nCertainly, there is no reason yet for the Bank and England to feel it needs to speed up the pace of rate cuts, and we expect the Bank to keep interest rates on hold next week.<\/p>\n<\/blockquote>\nShare\n\nRachel Reeves: ‘Change will not happen overnight’<\/h2>\n<\/header>\n Chancellor Rachel Reeves<\/strong> said:<\/p>\n\nTwo quarters of positive economic growth does not make up for fourteen years of stagnation. That is why we are taking the long-term decisions now to fix the foundations of our economy.<\/p>\n<\/blockquote>\nShare\n\nManufacturing was the main culprit behind the drop in industrial output (which also comprises mining and quarrying, and utilities) in July. <\/strong><\/p>\nManufacturing output fell by 1% from June, and declined by 0.3% in the three months to July, compared with the previous three months.<\/p>\n
Our story is here:<\/p>\nUK GDP contributors<\/span> Photograph: ONS<\/figcaption><\/figure>\nBloomberg\u2019s political editor Alex Wickham said on X:<\/p>\n