The UK economy has produced a run of more encouraging signals before the government’s October budget. Output grew in June and across the second quarter, services activity strengthened in August and consumer confidence improved. Taken together, the figures offer a firmer backdrop for ministers, although they do not remove the pressure on public finances or settle the outlook for the months ahead.
In brief
- UK growth reached 0.3% in June and 0.4% in the second quarter, led mainly by services.
- Services activity and consumer confidence improved in August, while public finance pressures remain ahead of October’s budget.
Economic output expanded by 0.3% in June and 0.4% over the second quarter, with services providing the main support. That momentum was followed by an unexpected improvement in a closely watched survey of service-sector activity and a less pessimistic assessment from households.
The timing matters because the October budget will be shaped by both the immediate condition of the economy and the government’s financial constraints. Recent releases point to greater resilience among businesses and consumers than had been expected earlier in the summer. They are not, however, a guarantee that the improvement will continue.
Services activity beats expectations
Services remain central to the picture. The S&P Global purchasing managers’ index for the sector rose from 52.1 in July to 52.8 in August, its highest reading for six months. The result exceeded the expectations of economists polled by Reuters, who had anticipated a slowdown.
The index reflects reported business conditions rather than total national output, but its rise adds to the earlier growth data. Services had already driven much of the second-quarter expansion, and the August reading suggests that activity in this large part of the economy held up better than expected during the summer.
That does not provide a complete forecast for the rest of the year. A survey result can change from month to month, while later official data may present a more detailed picture of output. Yet the latest figures on UK growth, services activity and consumer confidence show several recent indicators moving in the same direction.
The strength of services is particularly relevant across the wider Economy, where day-to-day activity ranges from professional services to hospitality and other customer-facing businesses. Firmer activity in that sector can shape employment, household spending and business sentiment, even when the wider outlook remains uncertain.
Households are less pessimistic, while retail data stay uneven
Consumer confidence also improved in August. GfK’s headline index rose from -17 in July to -14, its highest level in two years. The measure remains below zero, indicating that negative views still outweighed positive ones overall, but the change marks a less pessimistic mood than a month earlier.
Confidence around major purchases reached its highest point since December 2021. This suggests that households felt more positive about significant spending decisions than they had for some time. It does not demonstrate that all households have greater financial security, nor that improved sentiment will automatically produce higher spending.
Retail figures underline that distinction. Sales volumes excluding automotive fuel fell by 0.9% in July, showing that monthly consumer activity did not move in a straight line. Across the three months to July, however, those volumes were 4% higher than a year earlier, the strongest growth on that measure in five years.
The two readings describe different periods and should not be treated as competing accounts. The July decline captures one month, while the three-month comparison gives a broader view of retail volumes over the period to July. Alongside the rise in confidence, the data indicate improved recent conditions without proving a sustained acceleration in household spending. The latest reporting on services, confidence and retail volumes sets out both sides of that picture.
Public finance pressure still frames the budget
The improved data arrive alongside unresolved fiscal pressures. Public finances remain strained, and higher borrowing costs are among the difficulties identified before the October budget. Those issues will remain important when the government considers its choices, regardless of the more positive tone in the latest activity and confidence measures.
A stronger starting point, not a settled outlook
The recent releases provide a more constructive starting point than a weaker services reading or falling consumer confidence would have done. Growth was supported by services, the August survey exceeded expectations and households reported a less negative view of their position. Retail data also show that a single weak month followed a stronger three-month annual comparison.
For readers, the clearest message is that the economy has shown more momentum across several recent measures, while the financial pressures facing the government have not disappeared. The October budget will be judged against both realities: evidence of firmer near-term activity and the constraints that still shape the public finances.
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