Britain's economy grew more slowly than previously thought in the second quarter, revised official data showed Monday, dealing another early blow to new Prime Minister Keir Starmer and his Labour government.
However, there were also some signs of improvement in household finances ahead of next month's annual budget.
Economic output expanded by 0.5% in the April-to-June period, the Office for National Statistics (ONS) said on Monday. The reading was slightly weaker than a preliminary estimate for a 0.6% growth in gross domestic product (GDP) and was below economists' forecasts for another 0.6% rise.
"The U.K.’s GDP grew by slightly less than originally estimated in the second quarter of this year, but overall the U.K. economic outlook has improved considerably since the start of the year," said Gora Suri, an economist at PwC.
"This is largely the result of inflation being back to target, interest rates starting to come down and greater political stability post-election."
Britain's household saving ratio increased to 10% in the second quarter, up from 8.9% in the first three months of the year, and GDP per capita rose for a second quarter in a row, albeit more slowly than in the first quarter.
Britain's Labour government has made growing the U.K. economy a priority after winning national elections at the start of July but has been knocked off course during its first few months in office by strained economic data and highly controversial decisions taken by Starmer.
Britain's economy had grown 0.7% in the first quarter following a shallow and short-lived recession in the second half of last year.
However, U.K. inflation remains above the Bank of England's target rate, slowing its journey to cutting interest rates.
Recent data has also shown Britain's state debt rising to 100% of annual GDP – increasing the likelihood of biting tax rises in Labour's maiden budget on Oct. 30, according to analysts.
The government is already facing criticism from all sides over scrapping a winter fuel-benefit scheme for 10 million pensioners.
Treasury chief Rachel Reeves has suggested some taxes will rise in her first budget on Oct. 30, but she has also hinted that she might change fiscal rules on public debt, which could pave the way for more borrowing and help boost investment and economic growth.
The Bank of England (BoE) has forecast growth will slow to 0.3% in the third quarter of 2024 but said there were signs that its first interest rate cut in August and the expectation of more cuts, plus lower inflation, would boost growth later this year.
Compared with the second quarter of 2023, the economy grew by 0.7%, the ONS said, slower than economists' forecasts of a 0.9% rise.
Sterling was little changed against the U.S. dollar after the figures were released.
Economic growth in 2023 as a whole was revised up to show a 0.3% expansion, slightly stronger than a previous estimate of a 0.1% increase, reflecting an update to the ONS data.
However, the economy was still believed to have contracted in the third and fourth quarters of last year, meeting the technical definition of a recession.
Separate data published on Monday showed British house prices in September rose by the most since November 2022 in annual terms, up 3.2% compared with the same month last year.
