The British economy recorded better-than-expected growth in July, bolstered by higher output in the services, production, and construction sectors.
The UK's gross domestic product grew 0.4% month over month in July, following a 0.3% rise in June, data from the Office for National Statistics showed Friday. The latest reading came in above market forecasts of zero growth.
The statistics agency mainly attributed the GDP expansion to a 0.4% increase in services output, after a 0.4% expansion in June, largely due to positive contributions from administrative and support service activities, as well as information and communication.
Meanwhile, the production and construction industries logged gains of 0.2% and 0.1%, respectively, following declines of 0.2% and 0.1% in June.
"As in June, some businesses reported that the warm weather and FIFA World Cup had affected their activity, although effects differed across industries, benefitting some businesses while creating challenges for others," according to ONS Director of Economic Statistics Liz McKeown.
On a yearly basis, the UK economy expanded 1.6% in July, against the prior month's 1.1% gain and the consensus estimate of a 1.2% growth.
"Against the pattern of recent years, GDP growth retained momentum into the second half of the year rather than slowing. This lifted annual GDP growth from 1.1% yoy to 1.6% yoy, its fastest pace since early 2025. This is another sign that productivity growth has recovered, and that the economy can grow faster before domestic price pressures kick up," Berenberg said in a note. "However, it also hints that the Bank of England's (BoE's) bank rate of 3.75% is not as restrictive as we and some BoE rate setters thought. That poses an upside risk to our forecast that the BoE can remain on hold for the rest of the year, and lower rates in 2027."
"GDP growth will likely slow from here as the double squeeze on aggregate demand from higher energy prices and interest rates intensifies," the research firm added.
