Economy grows 0.1 per cent in August as factories rebound and services stall before the Budget

Britain's economy grew 0.1 per cent in August, beating expectations of a fall, as a rebound in factory output offset a flat month for services and a further decline in construction, the Office for National Statistics said on Thursday.

Monthly gross domestic product rose 0.1 per cent after growth of 0.4 per cent in July, which the ONS left unrevised, and 0.4 per cent in June, revised up from 0.3 per cent. Economists had expected a 0.1 per cent contraction in August. Production grew 0.8 per cent in the month, services showed no growth, and construction fell 0.2 per cent, its fourth consecutive monthly decline on the reported figures.

Photograph: David Dixon, via Wikimedia Commons (CC BY-SA 2.0)

Within production, manufacturing output rose 1.2 per cent in August. The wider three-month picture was firmer than the month alone: GDP grew 0.7 per cent in the three months to August, compared with the three months to May, following growth of 0.5 per cent in each of the previous two three-month periods. The ONS said it was the eighth consecutive three-month rise. Services grew 0.9 per cent over the three months, while production fell 0.2 per cent and construction fell 1.0 per cent.

A weak month inside a firmer quarter: the factories carried August while the consumer held back.British Journal analysis

Liz McKeown, the ONS director of economic statistics, said: “GDP growth showed further strength in the latest three months, led by the services sector, while both production and construction fell.” Compared with a year earlier, GDP was 2.1 per cent higher in August, and 1.8 per cent higher across the three months to August than in the same period a year ago.

Photograph: Txllxt TxllxT, via Wikimedia Commons (CC BY-SA 4.0)

Household-facing parts of the economy were weaker. Consumer-facing services fell 0.3 per cent in August, after a 0.1 per cent fall in July, with sports, amusement and recreation activities down 7.1 per cent and food and beverage service activities down 2.7 per cent in the month, the ONS said.

Markets took the figures, and the Chancellor's words, calmly. Reuters reported that the FTSE 100 rose 0.54 per cent to 10,782.98 points by mid-morning on Thursday, its highest since 18 September, after John Healey said this month's Budget would aim to bolster economic resilience and that he and Prime Minister Andy Burnham were aligned on maintaining fiscal discipline. The yield on the benchmark 10-year government bond fell to 5.34 per cent. The August figures were the last monthly GDP release before Healey delivers the Budget on 28 October.