Britain's gross domestic product grew by 0.2 per cent in August, compared with a fall of 0.6 per cent in July, according to the Office for National Statistics.
The ONS has revised its July GDP reading lower – previously, it was a contraction of 0.5 per cent.
“Our initial estimate suggests GDP grew a little in August, led by strong growth in services which was partially offset by falls in manufacturing and construction,” said Darren Morgan, director of economic statistics at the ONS.
“Within services, education returned to normal levels, while computer programmers and engineers both had strong months.
“Across the last three months as a whole, the economy has grown modestly, led by car manufacturing and sales, and construction.”
In terms of the broader picture of the UK economy, GDP increased by 0.3 per cent in the three months to August, the ONS said.
Growing by 0.4 per cent in August, the services sector provided the main boost to the monthly figures.
However, output in consumer-facing services fell by 0.6 per cent in August, following a fall of 0.2 per cent in July, while the construction sector contracted by 0.5 per cent in August, after a fall of 0.4 per cent the previous month.
But Ben Jones, lead economist at the Confederation of British Industry, said it was clear growth in the British economy “remains fairly anaemic”.
“Our business activity surveys have turned down and we're starting to see more of the effects of higher interest rates on the economy, particularly in the labour market,” he added.
“Businesses are looking to the Chancellor’s Autumn Statement to set out a clear plan to get the economy firing again, though a focus on measures to mobilise the potential and productivity of the UK workforce, by making full expensing permanent to unlock business investment and grasping the substantive opportunities of the net-zero transition.”
The modest recovery in August can, in most part, be attributed to the absence of the main factors that served to drag down the July GDP figures – namely the unseasonably wet weather and widespread industrial action.
While the August GDP reading from the ONS may signal that the UK economy will avoid falling into a technical recession of two consecutive quarters of negative growth, it may also give the Bank of England the clearance it needs to raise interest rates once more before the end of the year.
“Britain’s economy has remained surprisingly resilient in 2023, in the face of rapid interest rate hikes, tax increases, sticky inflation, disruptive strike action and the cost-of-borrowing crisis,” said Alice Haine, personal finance analyst at Bestinvest.
“The road ahead may be bumpier, however, with interest rates now at or close to their peak and expected to remain high for an extended period to contain inflationary pressures.
“Whether households need to brace for another rate rise is unclear, but the latest increase in output in August may bolster bets of a further hike before the end of the year.”
Also on Thursday, the Bank of England released its quarterly credit conditions survey, which found lenders decreased the number of available mortgages in the third quarter, a trend likely to continue to the end of the year.
The survey also showed defaults and losses on home loans increased in the three months from July to September, as more households were forced to remortgage at considerably higher rates of interest.
There was also a slight rise in demand for unsecured lending, such as credit cards, during the third quarter, which was expected to continue to increase in the last quarter of the year.
"Transaction activity in the property market is slowing and many borrowers are still rolling off sub-2 per cent deals and are eager to put off refinancing where they are able to do so," said Hina Bhudia, a partner at Knight Frank Finance.
"Borrowers that do act are generally opting for trackers. For many people, the risk that monthly payments increase in the event of another interest rate hike is worth taking if it gives them the opportunity to see cuts in their monthly outgoings next year."