UK economy grew 0.1% in August, beating expectations

The U.K. economy grew by a better-than-expected 0.1% in the month to August, with production growth offsetting weak output in services and construction.

Economists polled by Reuters had been expecting GDP to shrink by 0.1% between July and August. But the reading still marked a slowdown in momentum for British gross domestic product, which grew by 0.4% month-on-month in June and July.

Production grew by 0.8%, the U.K.'s Office for National Statistics said in a release on Thursday, while services showed no growth and construction fell by 0.2% in August.

On an annual basis, GDP grew by 2.1% in August, beating economists' expectations of 1.7%. The ONS said it marked the highest year-on-year GDP reading since August 2022.

The British pound jumped 0.4% against the U.S. dollar following the release, while yields on U.K. government bonds, known as gilts, fell across the curve. The yield on the benchmark 10-year gilt was last seen trading 9 basis points lower at 5.3364%.

The U.K., a net energy importer, is currently grappling with a cost-of-living crisis sparked by sticky inflation and surging energy costs in the wake of the wars in Ukraine and Iran.

The government will unveil its closely watched Autumn Budget later this month. It's tasked with sticking to the previous government's so-called fiscal rules aimed at reigning in public debt while delivering on promises to soften the blow of surging consumer costs.