Deutsche Bank Research, led by Chief UK Economist Sanjay Raja and economist Maui Brennan, nowcasts that UK GDP will be flat in August 2026 following a robust expansion in July, where GDP grew by 0.4% month-on-month [1]. The analysts attribute much of July's strength to more volatile industries, which they expect to reverse in August, resulting in a 0% month-on-month GDP print [1].
The research team anticipates a slight rise in services for August, but declines in production and construction sectors are expected to offset this growth [1]. They highlight that energy-driven price pressures, tighter financial conditions, and Budget uncertainty are weighing on both households and businesses, contributing to the anticipated slowdown in GDP momentum over the coming months [1].
Despite the expected stagnation in August, Deutsche Bank projects that quarterly GDP will remain strong for Q3-26 at 0.5% quarter-on-quarter, before slowing dramatically to 0.1% quarter-on-quarter in subsequent quarters [1]. For the full year 2026, GDP is forecast to grow by approximately 1.4% year-on-year, with a gradual increase expected over the following two years [1].
The analysts note that the one-off boost to household incomes in Q2-26, driven by an increase in net social benefits, will diminish as energy price pressures persist [1]. They caution that downside risks are mounting due to growing macroeconomic uncertainty, though they emphasize that the UK's resilience should not be understated [1].
CONCLUSION
Deutsche Bank expects UK GDP growth to lose momentum after a strong July, with flat growth projected for August and a significant slowdown anticipated in the coming quarters. Persistent energy price pressures and financial uncertainties are seen as key headwinds, though the UK's economic resilience remains a positive factor. Market participants should monitor upcoming data for confirmation of this expected deceleration.