The August result leaves the third quarter on track for solid growth. RSM UK had projected 0.4-0.5% for Q3 as a whole even assuming a weak August, and Deutsche Bank nowcasts 0.5% quarterly growth before a sharp slowdown to 0.1% in Q4. The second quarter was already revised up to 0.5% from 0.4%, powered by services exports and business investment, leaving the level of GDP 2.0% above its end-2024 mark.
Inflation complicates the picture. Headline CPI accelerated to 3.1% in August, a five-month high, though core inflation held at 2.6% for a fourth straight month and services inflation — the Bank of England's preferred gauge of domestic pressure — also remained elevated. The BoE kept rates on hold in September, and the combination of above-target inflation with persistent growth resilience may keep the Monetary Policy Committee cautious about cutting too quickly.
Household finances show strain beneath the headline growth. The saving ratio fell to 8.8% in Q2 from 9.5% earlier in the year, suggesting families are drawing down buffers to sustain spending amid higher energy bills and mortgage costs. Real household disposable income per head did rise 1.0% in the quarter to £6,577, reversing a Q1 decline, but the sustainability of that dynamic is uncertain with wage growth slowing and employment softening.