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UK Economy Unexpectedly Flatlines Again

September 9, 2024

The UK economy flatlined again in July, complicating matters for the Bank of England as policymakers seek to bring down inflation without tipping the economy into another recession.

Gross domestic product (GDP) was unchanged in July from the month before, coming in below expectations of 0.2% growth from economists polled by Reuters. The country also saw no GDP growth in June.

The UK economy had seen a solid expansion in the first four months of the year, giving hope for a rapid recovery for an economy that had fallen into a shallow recession in the second half of last year and has endured more than a decade of anemic growth, especially in comparison to its peers in the EU and US.

Britain’s dominant services sector showed slight growth of 0.1% in July, while production and construction output fell by 0.8% and 0.4% respectively. 

The most recent GDP reading was the first under Prime Minister Kier Starmer’s new Labour government, which was elected into power in July.

Despite two months of economic stagnation, the Bank of England is widely expected to leave interest rates unchanged when policymakers meet next week. Central bankers have stressed that they remain vigilant about the possibility of a resurgent spike in inflation, even as recent data points like wage growth point to subdued inflationary pressure.

The Labour government has committed to boosting growth but has also warned that it will have to raise taxes and cut spending to rein in high levels of debt.

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