The dominant services sector provided support as the economy grew by 0.3 per cent. However, over the three months to July growth stagnated and during the second quarter the economy contracted. Commenting on this morning’s data, director of Financial Markets Online, Samuel Fuller noted: “Seldom has stagnation seemed like such an achievement. “Despite sharp falls in both manufacturing and construction output, Britain’s vast service sector has ridden to the rescue once more – dragging the net position up to zero.
“As a result, the jury remains out on whether the UK is about to enter a recession. The prospect is perilously close but not yet inevitable.”
Meanwhile, growing optimism the UK will not leave the European Union without a deal continued to provide the pound with support.
But uncertainty remains over the EU granting a further extension with France’s foreign minister, Jean-Yves Le Drian stating France could not support an extension “in the current circumstances”.
Meanwhile, the US dollar was under pressure on Monday as markets weighed the possibility of a Federal Reserve rate cut next week.
On Friday, Fed Chairman, Jerome Powell said the bank would continue to act “as appropriate” to ensure economic expansion, a phrase previously used and interpreted by investors as a signal for further rate cuts.
Added to this, Friday’s mixed US jobs report suggested the US economy is beginning to decelerate in the second half of 2019.
Looking ahead to Tuesday, the pound could extend its gains following the release of July’s UK average earnings data.
If average earnings rise higher than forecast, it could buoy the pound against the dollar.