Britain’s economy shrank by 0.1% in August, but a better-than-previously thought performance in July is expected to help the UK avoid recession.
The Office for National Statistics (ONS) said economic growth picked up in August to 0.3% on a three-month basis – which is seen as less volatile than monthly data.
It revised up month-on-month growth to 0.4% in July, from the 0.3% previous estimate, suggesting a solid start to the third quarter, which should offset the weak August performance.
Experts said the three-month data suggests the UK will eke out growth overall in the third quarter.
This would mean the UK avoids a technical recession, following the 0.2% contraction in the second quarter.
Bank of England Governor Mark Carney said the UK economy is growing modestly, but warned a no-deal Brexit would weaken expansion further.
Speaking after unveiling the new polymer £20 note at an event in Margate, Mr Carney said: “The underlying pace of the economy is growing, but it’s just very modest.”
He added: “That pace of growth which is already weak would weaken further from a no-deal Brexit.”
The ONS figures showed robust expansion in the services sector helped offset a drop in manufacturing activity.
Services output grew 0.4% in the three months to July, while manufacturing dropped 0.4% and construction edged 0.1% higher.
Rob Kent-Smith, head of GDP at the ONS, said: “Growth increased in the latest three months, despite a weak performance across manufacturing, with TV and film production helping to boost the services sector.”
The pound was 0.2% higher at 1.223 US dollars after the data, but continued to weaken against the euro, down 0.3% to 1.11 euros.
But the monthly GDP figures showed a painful August for the economy, with services output flat-lining, manufacturing output falling 0.7%, agriculture down 0.1% and construction the only bright spot with a 0.2% rise.
Economist Howard Archer said the UK had also suffered a tough September, with closely-watched sector surveys suggesting all three main parts of the economy fell in September.
He said: “The economy looks to have had a very challenging and difficult September, and there is a very real possibility GDP could have contracted over the month, despite some stockbuilding occurring ahead of the October 31 Brexit date.”
However, the July upward revision means he is pencilling in growth of 0.4% overall in the third quarter.
The Bank of England last month forecast growth of 0.2% in the third quarter.