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UK economy expands 0.6% in second quarter

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UK economy expands 0.6% in second quarter

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The UK economy grew 0.6 per cent in the second quarter, in only a marginal slowdown from the robust growth of the previous three months, providing some good news for the new Labour government.

The quarter-on-quarter change in the GDP figure from the Office for National Statistics on Thursday compared with 0.7 per cent growth in the first three months of the year and was in line with economistsโ€™ expectations.

Monthly GDP growth was zero in June following a 0.4 per cent expansion in May, the ONS said. The figure was in line with analystsโ€™ expectations.

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Hailey Low, economist at the National Institute of Economic and Social Research, said the GDP figures โ€œsignal that growth remains on course, building on Q1โ€™s strong performanceโ€.

But she added: โ€œPersistent challenges such as low productivity growth, strained public finances and inadequate infrastructures have acted as barriers to achieving sustained growth.โ€

Prime Minister Sir Keir Starmer has placed growth at the centre of his economic agenda, promising to โ€œtake the brakes off Britainโ€.

Responding to the GDP data, chancellor Rachel Reeves said the government was โ€œunder no illusion as to the scale of the challenge we have inherited after more than a decade of low economic growthโ€.

Reeves argues that unless she can boost Britainโ€™s long-term growth rate, the country will be trapped in a โ€œdoom loopโ€ of high taxes and poor public services.

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But Jeremy Hunt, former Conservative chancellor, said: โ€œTodayโ€™s figures are yet further proof that Labour have inherited a growing and resilient economy.โ€

โ€œThe chancellorโ€™s attempt to blame her economic inheritance on her decision to raise taxes โ€” something she had always planned โ€” will not wash with the public.โ€

Sterling nudged higher following the ONS release.ย The pound climbed 0.2 per cent against the US dollar to $1.285.ย 

The yield on the interest rate-sensitive two-year gilt rose 0.03 percentage points to 3.58 per cent.

Ashley Webb, economist at consultancy Capital Economics, noted that the 0.6 per cent figure was marginally lower than the 0.7 per cent forecast by the Bank of England.

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โ€œAt the margin, this may give the bank a bit of reassurance that the recent strength of activity wonโ€™t prevent further falls in services inflation,โ€ he added.

Separate ONS data published on Wednesday showed services inflation, a crucial gauge of domestic price pressures in the eyes of interest rate-setters, fell more than expected to 5.2 per cent in July from 5.7 per cent in June.

The UK economy entered a technical recession at the end of last year after being hit by high inflation and borrowing costs. However, it returned to growth this year, helped by stronger household spending as price pressures and mortgage rates declined.

In August, the BoE upgraded its GDP growth forecast for this year to 1.25 per cent from just 0.5 per cent owing to stronger-than-expected activity in the first half of the year.

It expects quarterly GDP growth to fall back to 0.4 per cent and 0.2 per cent in the third and fourth quarters, respectively.

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Suren Thiru, economics director at the ICAEW professional body, said: โ€œThis current pace of economic growth is unlikely to be maintained in the second half of the year as weaker wage growth, high interest rates and persistent supply constraints limits output.โ€

Services grew 0.8 per cent in the three months to June, with widespread offsetting falls of 0.1 per cent in the production and construction sectors.

GDP per head, which matters for living standards, posted the second consecutive quarterly expansion, but it remains below the level of the same quarter last year following seven quarters of contraction.

In the second quarter, there were increases in gross capital formation, government consumption and household spending, partially offset by falls in net trade.

Bar chart of Contribution to GDP growth, % points showing UK growth was helped by increases in gross capital formation, government consumption and household spending

In June growth was flat, driven by a fall in services owing to a weak month for health, retailing and wholesaling. The health sector was affected by the junior doctorsโ€™ strike, while wet weather hit sales.

The UKโ€™s GDP quarter-on-quarter figure for the three months to June compares with a 0.3 per cent expansion in the Eurozone and 0.7 per cent growth in the US.

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Brass bands in Beijing make way for sticker shock at home as Trump returns to escalating inflation

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Brass bands in Beijing make way for sticker shock at home as Trump returns to escalating inflation

WASHINGTON (AP) โ€” President Donald Trump returned from the spectacle of a Chinese state visit to a less than welcoming U.S. economy โ€” with the military band and garden tour in Beijing giving way to pressure over how to fix Americaโ€™s escalating inflation rate.

Consumer inflation in the United States increased to 3.8% annually in April, higher than what he inherited as the Iran war and the Republican presidentโ€™s own tariffs have pushed up prices. Inflation is now outpacing wage gains and effectively making workers poorer. The Cleveland Federal Reserve estimates that annual inflation could reach 4.2% in May as the war has kept oil and gasoline prices high.

Trumpโ€™s time with Chinese leader Xi Jinping appears unlikely to help the U.S. economy much, despite Trumpโ€™s claims of coming trade deals. The trip occurred as many people are voting in primaries leading into the November general election while having to absorb the rising costs of gasoline, groceries, utility bills, jewelry, womenโ€™s clothing, airplane tickets and delivery services. Democrats see the moment as a political opportunity.

โ€œHeโ€™s returning to a dumpster fire,โ€ said Lindsay Owens, executive director of Groundwork Collaborative, a liberal think tank focused on economic issues. โ€œThe president will not have the faith and confidence of the American people โ€” the economy is their top issue and the president is saying, โ€˜Youโ€™re on your own.โ€™โ€

The presidentโ€™s trip to Beijing and his recent comments that indicated a tone-deafness to votersโ€™ concerns about rising prices have suggested his focus is not on the American public and have undermined Republicans who had intended to campaign on last yearโ€™s tax cuts as helping families.

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Trump described the trip as a victory, saying on social media that Xi โ€œcongratulated me on so many tremendous successes,โ€ as the U.S. president has praised their relationship.

Trump told reporters that Boeing would be selling 200 aircraft โ€” and maybe even 750 โ€œif they do a good jobโ€ โ€” to the Chinese. He said American farmers would be โ€œvery happyโ€ because China would be โ€œbuying billions of dollars of soybeans.โ€

โ€œWe had an amazing time,โ€ Trump said as he flew home on Air Force One, and told Fox Newsโ€™ Bret Baier in an interview that gasoline prices were just some โ€œshort-term painโ€ and would โ€œdrop like a rockโ€ once the war ends.

Inflationary pain is not a factor in how Trump handles Iran

Trump departed from the White House for China by saying the negotiations over the Iran war depended on stopping Tehran from developing nuclear weapons. โ€œI donโ€™t think about Americansโ€™ financial situation. I donโ€™t think about anybody. I think about one thing: We cannot let Iran have a nuclear weapon,โ€ Trump said.

That remark prompted blowback because it suggested to some that Trump cared more about challenging Iran than fighting inflation at home. Trump defended his words, telling Fox News: โ€œThatโ€™s a perfect statement. Iโ€™d make it again.โ€

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The White House has since stressed that Trump is focused on inflation.

Asked later about the presidentโ€™s words, Vice President JD Vance said there had been a โ€œmisrepresentationโ€ of the remarks. White House spokesman Kush Desai said the โ€œadministration remains laser-focused on delivering growth and affordability on the homefrontโ€ while indicating actions would be taken on grocery prices.

But as Trump appeared alongside Xi, new reports back home showed inflation rising for businesses and interest rates climbing on U.S. government debt.

His comments that Boeing would sell 200 jets to China caused the companyโ€™s stock price to fall because investors had expected a larger number. There was little concrete information offered about any trade agreements reached during the summit, including Chinese purchases of U.S. exports such as liquefied natural gas and beef.

โ€œForeign policy wins can matter politically, but only if voters feel stability and affordability in their daily lives,โ€ said Brittany Martinez, a former Republican congressional aide who is the executive director of Principles First, a center-right advocacy group focused on democracy issues.

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โ€œMidterms are almost always a referendum on cost of living and public frustration, and Republicans are not immune from the same inflation and affordability pressures that hurt Democrats in recent cycles,โ€ she added.

Democrats see Trump as vulnerable

Democratic lawmakers are seizing on Trumpโ€™s comments before his trip as proof of his indifference to lowering costs. There is potential staying power of his remarks as Americans head into Memorial Day weekend facing rising prices for the hamburgers and hot dogs to be grilled.

โ€œWhat Americans do not see is any sympathy, any support, or any plan from Trump and congressional Republicans to lower costs โ€“ in fact, they see the opposite,โ€ Senate Democratic leader Chuck Schumer of New York said Thursday.

Vance faulted the Biden administration for the inflation problem even though the inflation rate is now higher than it was when Trump returned to the White House in January 2025 with a specific mandate to fix it.

โ€œThe inflation number last month was not great,โ€ Vance said Wednesday, but he then stressed, โ€œWeโ€™re not seeing anything like what we saw under the Biden administration.โ€

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Inflation peaked at 9.1% in June 2022 under Biden, a Democrat. By the time Trump took the oath of office, it was a far more modest 3%.

Trumpโ€™s inflation challenge could get harder

The data tells a different story as higher inflation is spreading into the cost of servicing the national debt.

Over the past week, the interest rate charged on 10-year U.S. government debt jumped from 4.36% to 4.6%, an increase that implies higher costs for auto loans and mortgages.

โ€œMy fear is that the layers of supply shocks that are affecting the U.S. economy will only further feed into inflationary pressures,โ€ said Gregory Daco, chief economist at EY-Parthenon.

Daco noted that last yearโ€™s tariff increases were now translating into higher clothing prices. With the Supreme Court ruling against Trumpโ€™s ability to impose tariffs by declaring an economic emergency, his administration is preparing a new set of import taxes for this summer.

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Daco stressed that there have been a series of supply shocks. First, tariffs cut into the supply of imports. In addition, Trumpโ€™s immigration crackdown cut into the supply of foreign-born workers. Now, the effective closure of the Strait of Hormuz has cut off the vital waterway used to ship 20% of global oil supplies.

โ€œWeโ€™re seeing an erosion of growth,โ€ Daco said.

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Top Drug Regulator Is Fired From the F.D.A.

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Top Drug Regulator Is Fired From the F.D.A.

Dr. Tracy Beth Hoeg, the Food and Drug Administrationโ€™s top drug regulator, said she was fired from the agency Friday after she declined to resign.

She said she did not know who had ordered her firing or why, nor whether Health Secretary Robert F. Kennedy Jr. knew of her fate. The Department of Health and Human Services did not immediately respond to a request for comment.

The departure reflected the upheaval at the F.D.A., days after the resignation of Dr. Marty Makary, the agency commissioner. Dr. Makary had become a lightning rod for critics of the agencyโ€™s decisions to reject applications for rare disease drugs and to delay a report meant to supply damaging evidence about the abortion drug mifepristone. He also spent months before his departure pushing back on the White Houseโ€™s requests for him to approve more flavored vapes, the reason he ultimately cited for leaving.

Dr. Hoegโ€™s hiring had startled public health leaders who were familiar with her track record as a vaccine skeptic, and she played a leading role in some of the agencyโ€™s most divisive efforts during her tenure. She worked on a report that purportedly linked the deaths of children and young adults to Covid vaccines, a dossier the agency has not released publicly. She was also the co-author of a document describing Mr. Kennedyโ€™s decision to pare the recommendations for 17 childhood vaccines down to 11.

But in an interview on Friday, Dr. Hoeg said she โ€œstuck with the science.โ€

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โ€œI am incredibly proud of the work we were doing,โ€ Dr. Hoeg said, adding, โ€œIโ€™m glad that we didnโ€™t give in to any pressures to approve drugs when it wasnโ€™t appropriate.โ€

As the director of the agencyโ€™s Center for Drug Evaluation and Research, she was a political appointee in a role that had been previously occupied by career officials. An epidemiologist who was trained in the United States and Denmark, she worked on efforts to analyze drug safety and on a panel to discuss the use of serotonin reuptake inhibitors, the most widely prescribed class of antidepressants, during pregnancy. She also worked on efforts to reduce animal testing and was the agencyโ€™s liaison to an influential vaccine committee.

She made sure that her teams approved drugs only when the risk-benefit balance was favorable, she said.

The firing worsens the leadership vacuum at the F.D.A. and other agencies, with temporary leaders filling the role of commissioner, food chief and the head of the biologics center, which oversees vaccines and gene therapies. The roles of surgeon general and director of the Centers for Disease Control and Prevention are also unfilled.

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Supreme Court is death knell for Virginia’s Democratic-friendly congressional maps

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Supreme Court is death knell for Virginia’s Democratic-friendly congressional maps

The U.S. Supreme Court

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Andrew Harnik/Getty Images

The U.S. Supreme Court refused Friday to allow Virginia to use a new congressional map that favored Democrats in all but one of the state’s U.S. House seats. The map was a key part of Democrats’ effort to counter the Republican redistricting wave set off by President Trump.

The new map was drawn by Democrats and approved by Virginia voters in an April referendum. But on May 8, the Supreme Court of Virginia in a 4-to-3 vote declared the referendum, and by extension the new map, null and void because lawmakers failed to follow the proper procedures to get the issue on the ballot, violating the state constitution.

Virginia Democrats and the state’s attorney general then appealed to the U.S. Supreme Court, seeking to put into effect the map approved by the voters, which yields four more likely Democratic congressional seats. In their emergency application, they argued the Virginia Supreme Court was “deeply mistaken” in its decision on “critical issues of federal law with profound practical importance to the Nation.” Further, they asserted the decision “overrode the will of the people” by ordering Virginia to “conduct its election with the congressional districts that the people rejected.”

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Republican legislators countered that it would be improper for the U.S. Supreme Court to wade into a purely state law controversy โ€” especially since the Democrats had not raised any federal claims in the lower court.

Ultimately, the U.S. Supreme Court sided with Republicans without explanation leaving in place the state court ruling that voided the Democratic-friendly maps.

The court’s decision not to intervene was its latest in emergency requests for intervention on redistricting issues. In December, the high court OK’d Texas using a gerrymandered map that could help the GOP win five more seats in the U.S. House. In February, the court allowed California to use a voter-approved, Democratic-friendly map, adopted to offset Texas’s map. Then in March, the U.S. Supreme Court blocked the redrawing of a New York map expected to flip a Republican congressional district Democratic.

And perhaps most importantly, in April, the high court ruled that a Louisiana congressional map was a racial gerrymander and must be redrawn. That decision immediately set off a flurry of redistricting efforts, particularly in the South, where Republican legislators immediately began redrawing congressional maps to eliminate long established majority Black and Hispanic districts.

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