The latest figures, published by the Office for National Statistics (ONS) on 15 October, showed that growth slowed from 0.4% in July. Production increased by 0.8%, while services recorded no growth and construction output declined by 0.2%.
The figures come ahead of the Government’s Budget, with economists warning that rising inflation and uncertainty could weigh on economic activity towards the end of the year. Despite the monthly slowdown, the economy expanded by 0.7% in the three months to August, its eighth consecutive period of three-month growth.
Manufacturing Growth Helps UK Economy Avoid Predicted Contraction
Economists had anticipated a weaker August following stronger-than-expected performances in June and July. According to the Evening Standard, Robert Wood, chief UK economist at Pantheon Macroeconomics, had forecast a 0.3% contraction, while Thomas Pugh of RSM UK expected a smaller decline of 0.1%.
Deutsche Bank analysts had predicted that the economy would remain unchanged, with modest services growth potentially offsetting declines in production and construction. The official figures instead showed that production was the main driver of August’s expansion, increasing by 0.8% following growth of 0.3% in July.
Manufacturing output rose by 1.2%, with nine of its 13 subsectors recording increases. Pharmaceutical manufacturing grew by 5.1%, following a 3.4% rise in July, while transport equipment manufacturing increased by 1.8%.
According to the ONS, services output was unchanged in August after expanding by 0.5% in both June and July. Only four of the sector’s 14 subsectors recorded growth during the month.
Wholesale and retail trade, including motor vehicle repairs, increased by 2.0%, while professional, scientific and technical activities rose by 1.5%. Administrative and support services declined by 1.7%, reflecting weaker activity in rental and leasing, office support and employment services. Construction contracted by 0.2%, marking its fourth consecutive monthly decline. New construction work fell by 0.7%, with private housing work decreasing by 1.9%.
Stronger Quarterly Figures Contrast With Mounting Economic Pressures
Despite August’s modest monthly increase, the broader figures showed continued economic expansion. According to the ONS, GDP grew by 0.7% in the three months to August compared with the three months to May, following growth of 0.5% in each of the preceding two rolling three-month periods.
Services remained the main contributor, expanding by 0.9%. Professional, scientific and technical activities and information and communication each increased by 2.8%, while administrative and support services grew by 3.0%. Over the same period, construction output declined by 1.0% and production fell by 0.2%.
The economic outlook remains uncertain. ONS indicators for September showed weaker consumer demand, subdued housing activity and signs of labour market weakness. Wholesale electricity and gas prices remained more than double their levels a year earlier, while 73% of surveyed businesses expressed concern about rising fuel prices.
Pugh had also warned that inflation could reach around 4.5% early next year, with unemployment potentially rising above 5%. The August figures therefore present a mixed picture: continued economic growth, supported by manufacturing and professional services, alongside persistent weakness in construction and consumer-facing industries.
