UK set to avoid recession despite poor August

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The UK’s economy is expected to avoid a recession after showing better-than-expected growth in the three months to the end of August.

The 0.3% three-month rise came despite a contraction during August itself.

The economy shrank by 0.1% during the month, the Office for National Statistics (ONS) said, but growth in July was revised upwards to 0.4%.

The ONS said weakness in the manufacturing sector was offset by buoyant TV and film production.

“Services provided [the] majority of the growth over the three months, with production and manufacturing falling back,” said Rob Kent-Smith, head of GDP at the ONS.

The growth figures are being watched closely for signs of recession – defined as two consecutive quarters of contraction – after the economy shrank in the second quarter for the first time since 2012.

The next quarter runs until the end of October so the August data is the second month in the third quarter.

The contraction during August is not, however, expected to indicate a recession is looming.

Reuters reported that the ONS said the economy would have to contract by an unusually large 1.5% in September for this happen.

“The fact that growth in July was revised up from 0.3% month-on-month to 0.4% means fears that the economy is already in recession have been banished,” said Andrew Wishart, UK economist at Capital Economics.

He now thinks the economy could grow by 0.4% in the third quarter, more than he had originally expected.

In August, the economy was dragged lower by a drop in manufacturing when car production was subdued.

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