UK Economy Booms in Q2 but Faces Cooling Winds Ahead

The UK's economy surged forward in the second quarter of 2024, continuing its rapid expansion trajectory but at a slightly slower pace than in the first quarter. According to official data released on Thursday, the GDP grew by 0.6% over this period, aligning with market expectations. This robust performance prompted the Bank of England earlier this month to revise its annual growth forecast for 2024 from 0.5% to 1.25%, largely due to stronger-than-expected growth at the year's outset and an anticipated quarterly growth rate of 0.7% for the second quarter.
However, the outlook for the rest of the year appears less optimistic. The Bank of England projects that growth will slow to 0.4% in the third quarter and further decelerate to 0.2% in the final quarter of 2024. This expected slowdown is thought to be more reflective of the economy's underlying growth potential. Since the COVID-19 pandemic, economic growth in the UK has been markedly sluggish, outperforming only Germany among the world's major developed economies. Germany has also borne the brunt of skyrocketing energy prices following the Russia-Ukraine conflict.
Suren Thiru, Head of Economics at the Institute of Chartered Accountants in England and Wales, suggested that the UK's economic momentum might wane for the remainder of the year. Thiru noted that while the second quarter's vigorous growth could be attributed to temporary factors rather than any significant improvement in the underlying growth trajectory. Moreover, he pointed out that slower wage growth and persistently high interest rates might curb economic expansion in the latter half of the year.
The looming slowdown represents a contrast to the temporary surge in the second quarter, casting a shadow over the recent positive growth figures. The focus now shifts towards addressing these underlying economic challenges to sustain growth and ensure long-term economic stability in the UK.