GDP Stalls Again: What Rachel Reeves Must Address Now

The UK economy has shown no growth for two consecutive months, following a 0.5% increase in the three months leading to July. The latest GDP figures were unexpected, as the City had anticipated a growth of 0.2%. While the services sector experienced a slight increase of 0.1%, both production and construction sectors saw declines of 0.8% and 0.4%, respectively. Manufacturing has reached a record low, accounting for only 9.2% of the UK's output in the second quarter. Despite the flat GDP figures in June and July, previous quarterly data indicated growth, suggesting that the three-month averages may provide a more accurate picture of economic health. Business surveys hint at potential improvements, indicating that the current stagnation may be temporary. However, the lack of substantial action on industrial strategies, which have been discussed since Theresa May's time, raises concerns about future growth prospects. The Bank of England's role in addressing these economic challenges appears limited, with expectations for a rate cut diminishing. The Monetary Policy Committee is likely to adopt a cautious approach, waiting to assess the effects of previous cuts on inflation before making further decisions. Borrowers may have to wait until November for more favorable conditions. Political leaders, including Starmer and Reeves, are advised to temper their negative rhetoric, as persistent talk of economic troubles can lead to a conservative business environment. This could hinder growth and potentially lead to stagnation if businesses choose to conserve cash rather than invest in expansion.