The British economy grew relatively strongly in the spring, data on Thursday showed, the latest in a string of positive economic news.
After ending last year in a shallow recession, Britain’s economy has recovered as inflation slowed and business and consumer confidence improved. Output increased 0.6 percent in April to June, after growing 0.7 percent in the previous quarter, according to the nation’s statistics agency.
“Growth across the three months was led by the service sector, where scientific research, the I.T. industry and legal services all did well,” Liz McKeown, the director of economic statistics at the Office for National Statistics said in a statement about the second quarter’s results.
The growth report came after other data this week showed the inflation rate rising less than economists expected and the unemployment rate dropping, defying expectations that it would climb.
Though the numbers reflect the economy during last months of the previous government under the Conservative Party, they might bring some relief to the new government led by Prime Minister Kier Starmer of the Labour Party, who has been trying to defuse tensions after anti-immigration riots that were provoked, in part, by exploiting economic challenges such as struggling public services.
This week’s data bolstered expectations that the Bank of England would cut interest rates again this year, most likely in November. Inflation overall rose slightly in July, to 2.2 percent from 2 percent the previous month. At the same time, some stubborn components of inflation eased: Prices for services rose 5.2 percent, the slowest pace in two years.
The Bank of England, which targets 2 percent inflation, cut rates earlier this month for the first time since 2020.
Wage growth has also slowed recently. Policymakers have been watching for evidence that the labor market was cooling to give them greater confidence to cut interest rates without stoking inflation. For the average worker, pay has still risen faster than inflation recently, supporting household budgets.
Despite the positive signals, the Bank of England said that “underlying momentum” in the economy, based on business surveys, appears weaker than recent data had suggested. Economic growth will slow to 0.4 percent in the third quarter and 0.2 percent in the last three months of the year, the central bank forecast earlier this month.
The benefits of falling mortgage rates and the recovery of industries like construction will be felt slowly. Bank of England officials have said they aren’t in a rush to cut rates, having left them on hold for about a year. Traders are betting on three rate cuts between now and next spring.
At the same time, the government warned it would make “difficult” fiscal decisions later this year because the public finances are stretched, implying potential spending cuts and taxes increases. Many economists have said Britain needs significantly more investment to grow its economy; the government has said it will rely on the private sector to deliver much of it.