UK GDP grew at the meagre rate of 0.1% in August, as the economy was paralysed by fears of what the UK government may do to damage sentiment ahead of the upcoming budget.
The construction industry was a drag on overall activity as output fell 0.3%. Services flatlined while production grew 0.4%.
“The UK economy grew marginally in August, but remains firmly stuck in the slow lane. Recent data shows that growth tailed off over the summer and was downgraded in July, disappointing many after a strong start to the year,” explained Scott Gardner, investment strategist at Nutmeg.
“Driving this has been a distinct slowdown in economic activity, with the construction sector particularly weakened and services sector flat during August while the labour market deteriorates. Housing market activity has also been muted with the industry reporting a notable reduction in asking prices and demand over the summer months. For the UK economy to regain momentum, the housing market needs to become unstuck as this drives additional consumption beyond the purchase.”
The housing market’s associations with the UK wealth effect will need to be addressed to improve consumer confidence, which remains firmly in negative territory.
Analysts highlighted that the UK economy is likely to remain subdued in the coming months, with companies fearful of what the Chancellor has in store.
‘With HMS Brittania firmly off economic course, fiscal policy is going to be the likely lever required to chart a course back to safer waters,” said Isaac Stell, Investment Manager at Wealth Club.
“However, uncertainty reins, and until the spectre of the budgetary iceberg passes, UK PLC is likely to remain cautious and the economy certain to drift into stagnant waters.”