UK's economy beats forecasts with 0.4% rise in July

The UK economy expanded by 0.4% in July, outperforming economists’ expectation of no growth. Services, including computer programming, drove the stronger-than-expected result, with activity linked to AI providing support.

July Growth Outperforms Forecasts

The latest monthly figures point to continued momentum after mixed results earlier in the year, although the broader outlook remains constrained by global uncertainty and higher costs.

Recent Economic Pattern

July's 0.4% expansion came after growth of 0.3% in June and no growth in May. Over the three months to July, an underlying measure that compares with the preceding three-month period, the economy also grew by 0.4%.

Services Lead the Increase

A robust services-sector performance was central to the monthly rise, particularly in computer programming. The Office for National Statistics ONS said businesses involved in AI and associated technologies had helped lift the sector in May and June as well as July.

Significance of the Data

Experts said the result indicated that the economy had remained resilient despite shocks including the war in Iran. However, they also cautioned that rising energy costs could weaken household spending and slow growth in the months ahead.

Factors Shaping July Activity

The monthly outcome reflected both technology-related business activity and more temporary influences that affected industries differently.

Weather and Football Effects

Liz McKeown, the ONS director of economic statistics, said some firms reported that warm weather and the football world cup influenced activity during July. She said the impact varied between sectors, helping some companies while causing difficulties for others.

Government Assessment

Chancellor John Healey said the economy was showing welcome resilience amid serious global uncertainty. He said growth, while still fragile, was the fastest in the G7 during the first half of the year, but added that conflict in the Middle East affects domestic costs, from family food shopping to government borrowing.

Economist Views and Household Pressures

Commentary on the figures recognised the strength of the headline reading but highlighted risks for consumers, housing and business activity.

Public Discussion

No social-media reaction was provided in the available information. The reported discussion instead centred on economic analysts’ assessments of resilience, household budgets and the consequences of the Middle East conflict.

Analysts' Perspectives

Economists and investment researchers broadly identified short-term resilience while differing in emphasis over the pressures likely to emerge.

Evidence of Resilience

Paul Dales, chief UK economist at Capital Economics, said the July data showed that the economy’s resilience in the first half had carried into the second half.

Household Weakness

Yael Selfin, chief economist at KPMG, said the strong overall figure concealed a weaker position for households. Consumer-facing services declined in July as retail and hospitality activity fell after earlier summer increases.

Risks to Future Growth

Selfin said higher energy and fuel prices could further squeeze household budgets, while elevated mortgage rates would continue to weigh on housing and broader consumer spending. Dales said sustained increases in energy prices and borrowing costs would soon affect growth.

Outlook Ahead of the Budget

The durability of the July increase will depend on whether higher costs persist and how activity develops as the Budget approaches.

Near-Term Expectations

Richard Carter, head of fixed interest research at Quilter Cheviot, said growth would be difficult to secure and that activity was likely to stall before the Budget. He said the war in the Middle East continued to influence much of the economic data and described the UK as the most exposed to its fallout.

Key Indicators to Monitor

Energy and fuel prices, borrowing costs, mortgage rates, retail and hospitality activity, and household spending will be closely watched. Carter said calls for measures to support growth would become louder as the Budget nears, though it remained unclear whether the government had scope to act.

Frequently Asked Questions

Below are answers to common questions about the UK's 0.4% economic growth in July.

1. What started the UK's 0.4% rise in July?

The increase was driven mainly by services, particularly computer programming. Businesses involved in AI and associated technologies also supported activity during July, following contributions in May and June.

2. Why is the July growth figure attracting attention?

The UK economy beats forecasts with 0.4% rise in July, exceeding economists' expectation of no growth. The result also suggested that economic resilience continued despite global uncertainty, higher costs and conflict in the Middle East.

3. What are the latest updates on the UK economy?

The economy grew by 0.4% in July after expanding by 0.3% in June and recording no growth in May. It also increased by 0.4% over the three months to July, although consumer-facing services declined during the month.

4. What could happen next for the UK economy?

Growth could weaken if energy and fuel prices remain high, mortgage rates stay elevated or borrowing costs increase. Analysts also expect activity to face pressure ahead of the Budget, while the effects of the Middle East conflict continue to shape the outlook.

Based on reporting from the original report.