On June 13, 2022, a road barrier sign in London, England, against a wall outside of the royal exchange in the heart of the city of London.
Richard Baker | In pictures | Getty pictures
According to data published on Friday, the British economic growth in July strengthened the headache of Chancellor Rachel Reeves before the autumn budget.
The number corresponded to the expectations of the economists surveyed by Reuters and followed an expansion of 0.4% in June.
In July, the weakness focused on production production, which was made up for 0.9%, while the services and construction production rose higher, according to the British office for national statistics.
After the economy was better than expected in the second quarter, even though this decreased due to the bumper growth of 0.7% observed in the first quarter.
Economists now expect that the United Kingdom will be slowed down in the second half of 2025.
“After a surprisingly stronger second quarter, in which Great Britain demanded the fastest growth rate in the G7 people, all the signs of slowing down in the second half of the year indicate Sanjay Raja, the chief -uk economist of Deutsche Bank, noted this week.
“A course correction in the case of trading, inventory, net acquisitions of precious metals and expenses for the public sector, as we believe, will slow down the British GDP growth in the second half of 2025,” he added in email comments.
Headache for Rachel Reeves
Finance Minister Reeves has made top priority to revive the British economy, but has so far tried to implement its commitments into reality.
An economic slowdown is a blow to the government before the autumn budget on November 26, a high-stakes event for Reeves that promised to reduce expenses in the next few years through tax revenue and not by loans in order to reduce debt in Great Britain.
Therefore, potential tax increases are a special focus, Paul Dales, Chef Britann’s economist at the Capital Economics, proposed in a note on Friday.
“Stagnation in real GDP in July … shows that the economy still has difficulties in gaining a reasonable impetus given the air resistance hike to taxes and possible further tax increases in the budget,” he said.
Meanwhile, the Bank of England is trying to weigh this fiscal uncertainty with sticky inflation (which rose to a hotter than expected 3.8% in July).
“The gentle performance of the economy in July is probably not enough to compensate for the growing fear of inflation of the Bank of England,” said Dales.
Fabio Balboni, Senior European Economist at HSBC, beat a similar tone and told CNBC last week that “the resilience of inflation obviously makes it more difficult to further cut central banks”.
“Then, on the other hand, they have tax concerns, still very large budget deficits, for example in Great Britain, for example the very difficult decision for the government in the autumn budget,” added Balboni.
In the meantime, the Bank of England will meet on September 18, but is expected to hold the interest after cutting off in August. Afterwards, the bank’s nine -member monetary policy committee with a majority of 5 to 4 to reduce the key interest rate, the “bank set”, by 25 basis points to 4%, and explained that it would pursue a “gradual and careful” approach for monetary relaxation.
The meeting of the central bank on November 6th is now in the spotlight, especially since it is about to be budget.
“We still expect a rate in November, although the decision in August weakened our conviction in August,” said Carsten Brzeski, Global Head of Macro at ING, on Thursday.
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