UK GDP Expected to Show Moderate Q2 Growth, Economists Say

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UK GDP Expected to Show Moderate Q2 Growth, Economists Say

The UK economy is expected to report moderate growth for the second quarter of 2025, according to the latest forecasts from major financial institutions, as the country continues to navigate persistent inflationary pressures and elevated interest rates.

What the forecasts say

Economists polled by Reuters in early July project a quarter-on-quarter expansion of 0.2% for Q2, a slight slowdown from the 0.3% growth recorded in the first quarter. The Office for National Statistics is scheduled to release the official GDP estimate on August 15, 2025.

The anticipated moderation reflects a mixed picture across sectors. Services, which account for roughly 80% of UK output, are expected to remain the primary driver of growth, supported by consumer spending on hospitality and leisure. In contrast, manufacturing and construction have shown weakness, with the latter contracting for three consecutive months through May, according to PMI surveys.

Underlying trends and market context

The Bank of England’s monetary policy remains a key factor. After holding its benchmark rate at 4.5% in June, the Monetary Policy Committee signaled a cautious approach to future cuts, citing persistent services inflation and wage growth. Financial markets currently price in a 60% probability of a 25-basis-point cut at the August meeting, which could provide a modest boost to activity.

Household finances are under strain, with real incomes still below pre-pandemic levels. However, the recent easing in energy prices and a stable labor market have provided some support. The unemployment rate stood at 4.4% in the three months to April, near historical lows, though vacancies have continued to decline.

Why this matters

For businesses and investors, the GDP print will influence expectations for the Bank of England’s policy path and the broader economic outlook. A weaker-than-expected figure could intensify calls for rate cuts, while a stronger number might reinforce the central bank’s cautious stance. For households, the data provides a signal of the economy’s resilience amid cost-of-living challenges.

Conclusion

As the UK awaits the official Q2 GDP data, the moderate growth forecast underscores a period of subdued but stable expansion. The balance of risks remains tilted to the downside, with global trade tensions and domestic policy uncertainty posing potential headwinds. The August 15 release will be closely watched for its implications on monetary policy and the economic trajectory for the remainder of 2025.

FAQs

Q1: When will the UK Q2 GDP data be released?
The Office for National Statistics is scheduled to publish the official GDP estimate for the second quarter of 2025 on August 15, 2025.

Q2: What is the expected growth rate for Q2?
Economists forecast a quarter-on-quarter expansion of 0.2%, down from 0.3% in Q1, according to a Reuters poll conducted in early July.

Q3: How might the GDP data affect interest rates?
The Bank of England’s Monetary Policy Committee will consider the GDP data alongside inflation and employment figures when deciding on rates. A weaker-than-expected print could increase the likelihood of a rate cut at the August meeting.

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