UK economy grows again as GDP rises 0.6% in second quarter – what it means for your money

THE UK economy has continued growing as the latest figures showed GDP rose by 0.6% in between April and June.

Gross Domestic Product went up by 0.6% in the second quarter of this year, said the Office for National Statistics (ONS).

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It comes following GDP growth of 0.7% from January to March, when the UK economy moved out of a technical recession.

The latest figures will come as a boon to the Government despite inflation rising to 2.2% in July.

Liz McKeown, director of economic statistics at the ONS, said: "The UK economy has now grown strongly for two quarters, following the weakness we saw in the second half of last year."

The ONS said GDP rose by 0.6% in the second quarter of the year driven by services sector growth.

This includes across the IT industry, scientific research and legal services, despite June being a weak month for health and retail.

Rachel Reeves, Chancellor of the Exchequer, said the Government still remains cautious after today's positive figures.

She commented: "The new Government is under no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growth and a £22 billion black hole in the public finances.

"That is why we have made economic growth our national mission and we are taking the tough decisions now to fix the foundations, so we can rebuild Britain and make every part of the country better off."

Economists had previously predicted the UK economy would continue to grow across the second quarter, with higher growth expected in the second part of this year and into 2025.

It comes with inflation slowing to 2.2% from a record high of 11.1% in October 2022, tax cuts from the previous Government and falling interest rates.

The UK economy shrank by 0.3% in the last three months of 2023 meaning it tipped into a technical recession,

defined as two or more quarters in a row of falling Gross Domestic Product (GDP).

However, experts said the recession was considered "mild" compared to others in recent history.

WHAT THE FIGURES MEAN FOR YOUR MONEY

The latest GDP figures from the ONS are good news, not just for the economy but for your finances too.

GDP is a measure of the economic output of companies, individuals and governments and how healthy an economy is.

A healthy economy is one where GDP is growing but if it stalls or is falling, it's bad news for businesses and consumers.

Most economists, politicians and businesses want to see GDP rising steadily.

This is because it usually means people are spending more, more tax is paid to the government and workers get better pay rises.

A healthy economy usually means lower inflation, rising employment, less poverty, and more money in your pocket.

Lower inflation is good because it means prices don't rise as fast, putting less financial pressure on households.

The consumer Prices Index (CPI) inflation stood at 2.2% in July, after rising slightly from 2% the previous month.

However, this is still significantly lower than October 2022, when it peaked at 11.1% following soaring wholesale energy prices.

It's important to note when inflation falls that doesn't mean prices have stopped rising, they are just increasing at a slower pace.

However, some experts warn households are still under immense pressure.

Lindsay James, investment strategist at Quilter Investors said: "The second half of 2024 seems likely to be slow to change gear, despite the energy of a probable new government, with any noticeable changes not likely to be felt until 2025."

The BoE has been watching these figures closely as it decides whether to lower its base rate.

Markets are expecting the (BoE) to cut its base rate in August this year after policymakers kept it at 5.25% last week.

Interest rates currently stand at a 16-year high of 5.25%.

High street banks and lenders use the BoE base rate to set their own interest rates on mortgages, loans and savings accounts.

If it comes down, interest rates on mortgages, loans and savings accounts tend to fall too.

Mortgage lenders also tend to bring down rates in anticipation of the base rate falling.