Overview
- The Office for National Statistics reported August GDP rose 0.1%, driven by a 0.8% increase in production that offset flat services activity and a fall in construction.
- Before the ONS release, economists widely expected a month-on-month contraction with forecasts ranging from a 0.3% drop at Pantheon to zero growth at Deutsche Bank, a view shaped by July’s unexpected 0.4% AI-led services surge.
- Over the latest three months the economy expanded 0.7%, and RSM UK still judges third-quarter growth at about 0.4–0.5% despite the month-to-month volatility.
- Analysts warn the upbeat short-term figures do not erase rising risks from higher inflation, a likely rise in unemployment above 5%, and uncertainty around the upcoming Budget that could slow growth in late 2026 and early 2027.
- The data tightens choices for Chancellor John Healey and the Bank of England, with officials facing reduced fiscal room and the prospect of further interest-rate moves to curb inflation.