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 Russia-Ukraine war and the Iran war.

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.