Analysts will keenly be watching the release of the UK’s GDP data for June on Thursday (14 August), after the economy shrank in both April and May.
The UK is in recession if GDP falls for two successive three-month periods – known as quarters.
While there are ongoing concerns about he labour market and tax increases, Consultancy firm RSM believes that a recession should be avoided on the back of strong production and manufacturing output figures.
“Starting with the production side of the economy, we think industrial production climbed 0.6% m/m, largely thanks to a jump in mining output, which tends to be erratic,” the group said in a research note on Monday (11 August).
“Our estimates also suggest North Sea Oil loadings surged 23% in June on a seasonally adjusted basis. This means we can add a solid 3% jump in mining output to our calculations.”
Crucially, manufacturing output should gain 0.2% in June, the group said. “The sector is now broadly in line with where it was before tariff front-running caused output in February and Ma,rch to surge, with activity normalising.
“Early indicators of car production improved in June and the output balance of the manufacturing PMI has gained an impressive average of one point per month since it bottomed out in April.”
Elsewhere, construction output fell in May by its largest amount since July 2024. However, the sector looks ripe for a rebound as the UK had, according to the Met Office, the second hottest June on record, and good weather usually boosts construction output, RSM Consulting said.
“Rounding off with the services sectors, we’re looking for a modest 0.2% gain here. That will be driven by consumer-facing services. Retail sales gained 0.9% m/m after collapsing in May.
“Add in the rebound in motor trades we anticipate, then the retail sector should grow 0.7% in June. Good weather will likely also boost hospitality output. Our CGA-RSM Hospitality Tracker might show inflation outstripping sales growth, but total sales in June improved on May. We’re looking for a 0.3% gain there.
Rising mortgage approvals and a 13% monthly gain in housing transactions suggested June was a good month for estate agents and professional services.
Yet while housing transactions surged in May, real estate output fell. This is peculiar and suggests there could be an upside risk to the view that real estate output grew by just 0.1% in June.
“All in all, we think the economy came back to life in June. Admittedly, there’s a risk that some of April and May’s fall in output was reflective of genuine weakness instead of just tariff and tax front-running unwinding.
“Ultimately, improving business surveys, retail sales and housing market activity all point in one direction. That should be just enough for the economy to grow 0.2% in Q2.”
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