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LONDON – Britain's economy continued to stagnate month-on-month in July, flash figures released by the Office for National Statistics showed on Wednesday.
Gross domestic product (GDP) fell short of expectations from economists polled by Reuters, who had forecast growth of 0.2%.
The country did not record any GDP growth in June either.
Britain's dominant services sector posted modest growth of 0.1% in the month to July, while manufacturing and construction output fell 0.8% and 0.4% respectively.
Britain's economic growth rose 0.5% in the three months to July, slightly below economists' expectations and the 0.6% recorded in the second quarter ended June.
“The economy recorded no growth for the second month in a row, although longer-term strength in the services sector meant there was overall growth in the last three months,” said Liz McKeown, director of economic statistics at the ONS.
Britain's economy has posted modest but steady growth almost every month so far this year, after emerging from a shallow recession at the start of the year.
The reading is the first under Prime Minister Keir Starmer's new Labor government, elected on July 4.
Finance Minister Rachel Reeves said the print gave her “no illusion” about the challenges facing the UK economy.
“I have to be honest with the British people that change will not happen overnight. Two-quarters of positive economic growth does not make up for fourteen years of stagnation,” Reeves said.
It comes ahead of the upcoming fall statement on October 30, where Reeves will announce her annual budget. She has already warned it will be painful after saying she inherited a 22 billion pound ($29 billion) hole in the public finances from the former Conservative government. His predecessor, Jeremy Hunt, has dismissed the claims and described the alleged black hole as “fiction”.
Lindsay James, investment strategist at Quilter Investors, said the prospect of tax increases could make consumer spending even more cautious in the coming months.
“Tax rises have been announced in the run-up to the autumn Budget and consumers and businesses may be a little more cautious as we enter the winter months as they await details from the Treasury,” she said.
However, she added that a further interest rate move expected from the Bank of England could help ease overall growth pressures. The central bank will make its latest monetary policy decision next week after cutting interest rates for the first time in four years last month.
“However, this month could just be a blip given the recent positive news about the state of the overall economy, particularly as interest rate cuts continue to occur in the coming year,” James noted.
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