- The UK economy unexpectedly grew by 0.4% in July
- The ONS pointed to evidence that the dominant service sector was boosted by ‘business involved with AI and related technologies’
- The hot weather and World Cup were a double-edged sword with some businesses benefiting whilst others lost out
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“Relatively robust is a fair assessment of how the UK economy performed in July, especially as most economists had thought growth would wilt in the scorching summer heat.
“The dominant service sector helped power the economic engine, with those huge sums of cash being spent on AI finally showing up in official figures, with computer programming the largest contributor to growth in the sector.
“Global stock markets have been powered by eyewatering sums of AI spend and businesses have been rushing to make the most of the technology to boost productivity in a myriad of ways that are still difficult for official figures to truly quantify.
“But whilst it is important not to talk down the resilience of the UK economy it is as important not to ignore underlying issues which were expected to show up in today’s figures and are still expected to impact growth in the second half of the year.
“Consumer facing services came under pressure in July, with sweltering temperatures and World Cup fever acting as a double-edged sword, benefiting some businesses like pubs whilst diverting spend away from others like restaurants.
“And the summer’s jump in energy prices is expected to impact household spending choices as the nights draw in and temperatures fall, especially as the price at the pump shoots up once again and people brace for higher prices at the supermarket.
“Whilst all sectors delivered some growth in July, looking over a three-month period, it was only the service sector on the front foot, and despite the clarion call for more new homes to be built, a sluggish housing market and high mortgage rates saw new construction work fall back.
“The next few months are expected to be challenging for a government committed to delivering growth, battling a difficult geopolitical backdrop and rising borrowing costs which will limit the chancellor’s ability to deliver the kind of measures business groups say are needed to stop the economy from stalling altogether.”
