Monthly GDP grew by 0.5 per cent in June following a contraction in growth by 0.1 per cent in May. This monthly figure was driven both by a weaker-than-normal May performance due to the extra bank holiday, as well as stronger-than-expected growth in production and construction.
GDP grew by 0.2 per cent in the second quarter of 2023 relative to the previous quarter, higher than we had forecast last month. However, as shown in figure 1 below, the economy has largely flatlined following the initial stages of post-pandemic recovery; today’s monthly GDP is estimated to be only 0.8 per cent above its pre-pandemic (February 2020) level.
Our early forecast for the third quarter of 2023 expects GDP to grow by 0.3 per cent, remaining broadly consistent with the longer-term trend of low, but stable, economic growth in the United Kingdom. That said, as persistently high inflation continues to squeeze household budgets, alongside the effects of the high cost of borrowing, demand will be curbed in the near term. As a result, service-sector output in particular may falter and drag down on GDP in the coming months. The risks to GDP at the moment thus continue to be skewed downside.