The UK eked out growth in August, but only just, demonstrating how the burden of high borrowing costs and the wider cost-of-living crisis is still weighing hard on consumer and company sentiment.

The picture being painted by this numbers is of an economy only just grinding forward, with the services sector accounting for any growth while production and construction activity has fallen sharply.

We still haven’t felt the full effect of previous rate hikes, and so the prospects of recession are still looming on the horizon with so little respite expected on sideswiped budgets.

LIS Show – MPU

At the very most, it appears the UK is in a period of stagflation, with the economy stagnating while inflation stays elevated.

It does represent a significant recovery though from July although growth for the month has also been revised down to 0.6% from 0.5% indicating that the combination of strikes and poor weather was even more toxic than first thought.

As the rain continued though August, combined with a squeeze on budgets August proved to be a very dismal month for the arts, entertainment, and recreation industry.

Overall activity in this sector of the economy fell by 7.4%.

Downpours disrupted festivals and outdoor arts events and sporting fixtures, with wellies and mud a difficult substitute for hoped for sandals and sunshine.

Activity in services was supported by an end to the teachers strike, as holidays aren’t counted, and also a boost in business for consultants, architects, engineers and laboratory testing.

With little momentum in the economy and plenty of risk that the hike in borrowing costs will take a greater toll during the months to come, Bank of England policymakers look set to keep the pause button held on interest rate hikes.

Susannah Streeter
Susannah Streeter, head of money and markets, Hargreaves Lansdown.
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Susannah Streeter
Susannah Streeter, Head of Money and Markets, Hargreaves Lansdown

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