UK Economy Makes Weak Start to Second Half of The Year

• Britain's economy recorded zero monthly growth in July after a sharp drop in factory output, matching expectations for a slower start to the second half of 2025 but still disappointing for the government ahead of November's budget.
• After a strong first half to the year, economists expect growth to slow over the second half as U.S. tariffs continue to weigh on the global economy and Britain faces headwinds from rising inflation and uncertainty over who will be hit by likely tax rises later this year.
• Finance minister Rachel Reeves highlighted that the economy "isn't broken, but it does feel stuck" as she set out measures to streamline part of the tax system. Friday's data showed that manufacturing output - which makes up 9% of the economy - dropped by a hefty 1.3% on the month in July, its biggest fall in a year, led by computers, electronics, and pharmaceuticals, the Office for National Statistics said. But the much larger services sector edged up 0.1% in the month, slightly ahead of expectations.
• GDP rose 0.4% month-on-month in June and on a three-month basis. However, the Office for National Statistics’ (ONS') preferred way of presenting the figures showed that growth slowed to 0.2% in the three months to July from 0.3% in the second quarter.
• "July's slowdown is probably the start of a more restrained period for the economy with higher inflation and rising job losses likely to have stifled activity in August, despite an expected uplift from the warm weather," said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales (ICAEW) accountancy body.
• Sterling weakened slightly after the data before recovering and financial markets continued to price in only around a 40% chance of another BoE rate cut this year, with inflationthis month expected to hit double the BoE's 2% target.

(Source: Reuters)