09:24 AM EDT, 08/15/2024 (MT Newswires) -- The United Kingdom's Q2 gross domestic product (GDP) growth Thursday surged for a second straight quarter hitting 0.6% q/q, noted Sanjay Raja, UK Chief Economist at Deutsche Bank Research.

Much of the growth was in line with the bank's expectations, with household spending expanding by 0.2% q/q and business investment shrinking by 0.1% q/q. The bulk of the uplift in growth came from government spending (1.6% q/q) with stocks and net acquisitions also seeing big uplifts.

The good news is that this should lift the overall size of the economy, leaving the finance minister with a slightly better near-term outlook than what the Office for Budget Responsibility (OBR) presented in March, stated Raja. For the Bank of England (BoE), the slightly lower growth rate (including its composition) should leave the door open to further rate cuts -- particularly given Wednesday's weaker inflation data.

However, investors don't expect the strong growth in H1 2024 to last, added Raja. They should see some slowdown. Indeed, June's GDP flatlined, with the services sector shrinking by 0.1% m/m. Carry-over effects into Q3 will be weaker.

Catch-up effects, following on from the short and shallow technical recession the UK had in H2 2023, will likely diminish.

Deutsche Bank continues to remain more optimistic than consensus on growth. It sees H2 2024 GDP growth slowing to 0.4% q/q. The bank predicts 2024 GDP growth moving to 1.2%, before rising to 1.6% over the next two years, respectively.