UK economy returns to growth as GDP grew 0.2% – what it means for your money --[Reported by Umva mag]

THE UK economy grew in August after it was flat in the previous two months, according to the latest official figures. The Office for National Statistics (ONS) said gross domestic product (GDP) recorded 0.2% growth in August, up from no growth (0%) in June and July. The latest figures for GDP were released today, October 11 It was in line with economist predictions but is nevertheless a boost for new Chancellor Rachel Reeves ahead of this month’s autumn Budget. GDP is one of the main indicators used to measure the performance of a country’s economy. When GDP goes up, the economy is generally thought to be doing well. The services sector was the main contributor to growth, up 0.1% in August after a similar rise in July. Meanwhile, the smaller production sector swung to 0.5% growth after a 0.7% contraction in July, revised from a 0.8% estimate in last month’s figures. Liz McKeown, ONS director of economic statistics at the ONS, said: “All main sectors of the economy grew in August, but the broader picture is one of slowing growth in recent months, compared to the first half of the year. “In August, accountancy, retail and many manufacturers had strong months while construction also recovered from July’s contraction. “These were partially offset by falls in wholesaling and oil extraction.” The ONS also said that the economy grew by 0.2% in the three months to August. Chancellor Rachel Reeves said: “It’s welcome news that growth has returned to the economy. “Growing the economy is the number one priority of this Government so we can fix the NHS, rebuild Britain, and make working people better off.” What does it mean for my money? This is good news, not just for the economy but for your finances too. GDP measures the economic output of companies, individuals and governments. It’s also a measure of how healthy and prosperous an economy is. Most economists, politicians and businesses want to see GDP rising steadily. This is because it usually means people are spending more, more tax is paid to the government and workers get better pay rises. A healthy economy usually means lower inflation, rising employment, less poverty, and more money in your pocket. Lower inflation is good because it means prices don’t rise as fast, putting less financial pressure on households. The Bank of England (BoE) uses GDP and inflation as key indicators when determining the base rate. This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy. Usually when inflation is low, the BoE would cut interest rates to try to speed the economy up. The Consumer Prices Index (CPI) rate of inflation stood at 2.2% in August, following a slight rise from 2% the previous month. However, this is still significantly lower than October 2022, when it peaked at 11.1% following soaring wholesale energy prices. Lower inflation is good because it means prices don’t rise as fast, putting less financial pressure on households. However, if GDP growth is steady but low, the bank may decide to refrain from cutting interest rates too quickly to ensure a consistent flow of cash into the economy. Nicholas Hyett, investment manager at Wealth Club said: “This is all welcome news for the Treasury ahead of the Budget which is expected to see taxes rises, potentially slowing economic activity. “It does raise a conundrum for the Bank of England though. “The Bank had been eyeing up further interest rate cuts, but the economy doesn’t look like it’s crying out for more monetary support and with inflation expected to accelerate again into Christmas, rate setters might be thinking it makes sense to sit on their hands a little while longer.” The BoE will be watching the latest GDP figures closely as it decides whether to lower its base rate further in November. The central bank cut the base rate from 5.25% to 5% in August before holding it at this rate again in September. The next Bank of England base rate review is scheduled for Thursday, November 7. High street banks and lenders use the BoE base rate to set their own interest rates on mortgages, loans and savings accounts. If it comes down, interest rates on mortgages, loans and savings accounts tend to fall too. Mortgage lenders also tend to bring down rates in anticipation of the base rate falling. What is the base rate and how does it affect the economy? NINE members of the Bank of England's Monetary Policy Committee meet eight times each year to set the base rate. Any change to the Bank’s rate can have wide-reaching consequences as it directly influences both: The cost that lenders charge people to borrow money The amount of savings interest banks pay out to customers. When the Bank of England lowers interest rates, consumers tend to increa

Oct 11, 2024 - 06:44

UK economy returns to growth as GDP grew 0.2% – what it means for your money --[Reported by Umva mag]

THE UK economy grew in August after it was flat in the previous two months, according to the latest official figures.

The Office for National Statistics (ONS) said gross domestic product (GDP) recorded 0.2% growth in August, up from no growth (0%) in June and July.

UK, London, blurred motion of incidental business people walking to work with view of the financial district behind — The latest figures for GDP were released today, October 11

It was in line with economist predictions but is nevertheless a boost for new Chancellor Rachel Reeves ahead of this month’s autumn Budget.

GDP is one of the main indicators used to measure the performance of a country’s economy.

When GDP goes up, the economy is generally thought to be doing well.

The services sector was the main contributor to growth, up 0.1% in August after a similar rise in July.

Meanwhile, the smaller production sector swung to 0.5% growth after a 0.7% contraction in July, revised from a 0.8% estimate in last month’s figures.

Liz McKeown, ONS director of economic statistics at the ONS, said: “All main sectors of the economy grew in August, but the broader picture is one of slowing growth in recent months, compared to the first half of the year.

“In August, accountancy, retail and many manufacturers had strong months while construction also recovered from July’s contraction.

“These were partially offset by falls in wholesaling and oil extraction.”

The ONS also said that the economy grew by 0.2% in the three months to August.

Chancellor Rachel Reeves said: “It’s welcome news that growth has returned to the economy.

“Growing the economy is the number one priority of this Government so we can fix the NHS, rebuild Britain, and make working people better off.”

What does it mean for my money?

This is good news, not just for the economy but for your finances too.

GDP measures the economic output of companies, individuals and governments.

It’s also a measure of how healthy and prosperous an economy is.

Most economists, politicians and businesses want to see GDP rising steadily.

This is because it usually means people are spending more, more tax is paid to the government and workers get better pay rises.

A healthy economy usually means lower inflation, rising employment, less poverty, and more money in your pocket.

Lower inflation is good because it means prices don’t rise as fast, putting less financial pressure on households.

The Bank of England (BoE) uses GDP and inflation as key indicators when determining the base rate.

This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.

Usually when inflation is low, the BoE would cut interest rates to try to speed the economy up.

The Consumer Prices Index (CPI) rate of inflation stood at 2.2% in August, following a slight rise from 2% the previous month.

However, this is still significantly lower than October 2022, when it peaked at 11.1% following soaring wholesale energy prices.

Lower inflation is good because it means prices don’t rise as fast, putting less financial pressure on households.

However, if GDP growth is steady but low, the bank may decide to refrain from cutting interest rates too quickly to ensure a consistent flow of cash into the economy.

Nicholas Hyett, investment manager at Wealth Club said: “This is all welcome news for the Treasury ahead of the Budget which is expected to see taxes rises, potentially slowing economic activity.

“It does raise a conundrum for the Bank of England though.

“The Bank had been eyeing up further interest rate cuts, but the economy doesn’t look like it’s crying out for more monetary support and with inflation expected to accelerate again into Christmas, rate setters might be thinking it makes sense to sit on their hands a little while longer.”

The BoE will be watching the latest GDP figures closely as it decides whether to lower its base rate further in November.

The central bank cut the base rate from 5.25% to 5% in August before holding it at this rate again in September.

The next Bank of England base rate review is scheduled for Thursday, November 7.

High street banks and lenders use the BoE base rate to set their own interest rates on mortgages, loans and savings accounts.

If it comes down, interest rates on mortgages, loans and savings accounts tend to fall too.

Mortgage lenders also tend to bring down rates in anticipation of the base rate falling.

What is the base rate and how does it affect the economy?

NINE members of the Bank of England's Monetary Policy Committee meet eight times each year to set the base rate.

Any change to the Bank’s rate can have wide-reaching consequences as it directly influences both:

The cost that lenders charge people to borrow money
The amount of savings interest banks pay out to customers.

When the Bank of England lowers interest rates, consumers tend to increase spending.

This can directly affect the country’s GDP and help steer the economy into growth and out of a recession.

In this scenario, the cost of borrowing is usually cheap, and the biggest winners here are first-time buyers and homeowners with mortgages.

But those with savings tend to lose out.

However, when more credit is available to consumers, demand can increase, and prices tend to rise.

And if the inflation rate rises substantially – the Bank of England might increase interest rates to bring prices back down.

When the cost of borrowing rises – consumers and businesses have less money to spend, and in theory, as demand for goods and services falls, so should prices.

The Bank of England is tasked with keeping inflation at 2%, and hiking interest rates is a way of trying to reach this target.

In this scenario, the losers are those with debt.

First-time buyers will lose out to cheaper mortgage rates, and those on tracker or standard variable rate mortgages are usually impacted by hikes to the base rate immediately.

Those on a fixed-rate deal tend to be safe if they fixed when interest rates were lower – but their bills could drastically increase when it’s time to remortgage.

The cost of borrowing through loans, credit cards and overdrafts also increases when the base rate rises.

However, the winners in this scenario are those with money to save.

Banks tend to battle it out by offering market-leading saving rates when the base rate is high.

How to protect your finances

If you are concerned about your finances, it is important to remember that there are ways to keep your cash safe.

Make sure you go through all your bank statements and accounts so you know what your income and outgoings are every month.

You can save money by moving to a cheaper mobile phone tariff or by axing subscriptions you don’t need like Netflix or Amazon Prime.

If you’ve got any outstanding debts, don’t ignore them as it will only make your financial situation worse.

Stay on top of what you owe and always repay priority debts.

There are plenty of organisations where you can seek debt advice for free.

You should also check what benefits you are eligible for as you might be able to claim without realising.

Entitledto’s free calculator works out whether you qualify for various benefits, tax credits and Universal Credit.

If you don’t want to register, consumer group moneysavingexpert.com and charity StepChange both have benefits tools powered by Entitledto’s data that let you save your results without logging in.

There is also emergency funding available for struggling households, which is dished out by local councils.

The Household Support Fund is designed to help those on a low income or benefits cover the cost of food, energy and general living costs.

What help is available varies depending on where you live as each council sets its own eligibility criteria.

It’s worth getting in touch with your local authority to see what you might be able to get.

You can find what council area you fall under by using the government’s council locator tool online.

The following news has been carefully analyzed, curated, and compiled by Umva Mag from a diverse range of people, sources, and reputable platforms. Our editorial team strives to ensure the accuracy and reliability of the information we provide. By combining insights from multiple perspectives, we aim to offer a well-rounded and comprehensive understanding of the events and stories that shape our world. Umva Mag values transparency, accountability, and journalistic integrity, ensuring that each piece of content is delivered with the utmost professionalism.