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UK economy grows again as GDP rises 0.6% in second quarter – what it means for your money
Read below to find out what it all means for your finances
THE UK economy has grown again with the latest data showing 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, which was revised up from 0.6% previously.
The ONS said GDP showed no growth in April, grew by 0.4% in May then did not grow again in June, due to strike action.
GDP is a measure of the economic output of companies, individuals and governments and of how healthy an economy is.
The latest figures mean GDP has grown for two consecutive quarters and will come as a boon to the Government despite inflation rising to 2.2% in July.
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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 included 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 remained cautious following today's GDP figures.
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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."
What is inflation and what does it mean for me?
Economists had previously predicted the UK economy would continue to grow across the second quarter of this year, with higher growth expected in the second part of 2024 and into 2025.
It comes following 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).
GDP shrank by 0.1% between July and September, according to revised figures from the ONS.
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.
The BoE will be watching the latest GDP figures closely as it decides whether to lower its base rate further in the second half of the year.
The central bank cut the base rate from 5.25% to 5% earlier this month, with expectations it could be dropped further this year.
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.
HOUSEHOLDS STILL STRUGGLING
Despite multiple signs showing the UK economic situation is improving, millions of households are still struggling.
Sarah Pennells, consumer finance specialist at Royal London, said its latest Financial Resilience Report data showed almost a fifth of people are overdrawn on their bank accounts while the same amount have less than £100 in savings.
That comes despite wages growing, albeit at their slowest rate in two years, according to the latest data from the ONS.
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Aline Haines, personal finance analyst at Bestinvest, said that with pockets hit with higher borrowing costs over the last few years, households may still be nervous about being frivolous with their cash just yet.
She added that frozen income tax thresholds, which have seen more people dragged into paying income tax as their wages increase, will mean people are also cautious with their spending.
How to get free debt help
There are several groups which can help you with your problem debts for free.
- Citizens Advice - 0800 144 8848 (England) / 0800 702 2020 (Wales)
- StepChange - 0800138 1111
- National Debtline - 0808 808 4000
- Debt Advice Foundation - 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations - don't be tempted to use a claims management firm.
They say they can write off lots of your debt in return for a large upfront fee.
But there are other options where you don't need to pay.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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