The UK economy grew 0.1% in August, beating forecasts for a contraction, as production offset flat services and falling construction. The British pound rose 0.4% against the US dollar after the release, while gilt yields fell.
The UK economy grew by 0.1% in the month to August, while economists polled by Reuters had expected GDP to shrink by 0.1%. The reading marks a slowdown from the 0.4% month-on-month growth in June and July, but annual GDP growth reached 2.1%.
Pound and gilts react to the data
The British pound jumped 0.4% against the US dollar after the release. Yields on UK government bonds, known as gilts, fell across the curve, and the benchmark 10-year gilt traded 9 basis points lower at 5.3364%.
Production lifts growth while services stall
Production grew by 0.8%, according to the Office for National Statistics, while services showed no growth and construction fell by 0.2%. The ONS said the annual figure was the highest year-on-year GDP reading since August 2022.
Over the three months to August, the economy grew by 0.7% overall, and an earlier estimate for June's monthly growth was revised up from 0.3% to 0.4%. Paul Dales, chief UK economist at Capital Economics, said the economy was "more robust than we thought" according to the BBC. He warned that an expected increase in inflation would still dampen growth.
Budget looms later this month
The figures are the last official data before Chancellor John Healey's Budget, which he plans to set out later this month. The government is tasked with sticking to the previous government's fiscal rules on public debt while delivering on promises to soften the blow of surging consumer costs.
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