LONDON – The British economy registered a modest rebound in August as the dominant services sector offset another weak month for manufacturers and construction firms.  

Gross domestic product rose 0.2 per cent following a revised 0.6 per cent contraction in July, the Office for National Statistics said on Thursday. Economists had expected growth of 0.2 per cent.

The recovery partly reflects the absence of factors that depressed activity in July, namely wet weather and large-scale strikes. Services grew 0.4 per cent. However, manufacturing shrank 0.8 per cent and construction contracted 0.5 per cent.

The figures reinforce a picture of an economy losing steam in the face of a sharp increase in borrowing costs.

The Bank of England (BOE) held interest rates last month, fuelling speculation that the most aggressive hiking cycle since the late 1980s may have come to an end. 

Doubts remain over the third quarter as a whole, with the BOE predicting growth of just 0.1 per cent in the period.

For a flat third quarter, GDP will need to rise at least 0.2 per cent in September.

A contraction during the quarter could mean the economy is already in recession.

With key purchasing managers’ indexes flashing warning signs and unemployment rising, Bloomberg Economics is expecting a year-long contraction starting in the final three months of 2023. BLOOMBERG