Investing.com — Britain’s economy grew for an eighth consecutive three-month period in July, official data showed on Friday, extending a run of upside surprises that has split analysts between those crediting a genuine AI investment boom and those warning the headline numbers overstate the recovery’s strength.
Gross domestic product rose 0.4% in July from June, the Office for National Statistics said, beating economists’ expectations for no growth.
Output also expanded 0.4% in the three months to July compared with the previous three-month period, matching June’s reading and extending an unbroken growth streak that began late last year.
The information and communication sector was again the standout performer, with computer programming, consultancy and related activities surging 4.4% on a three-month basis. Professional, scientific and technical activities rose 2.1%, while administrative and support services gained 1.3%. Wholesale and retail trade fell 0.5% and education slipped 0.3%, which the ONS linked in part to school closures during June’s heatwave.
Sanjay Raja, chief UK economist at Deutsche Bank, said the breadth of the rise made it hard to dismiss.
“Yet again, the UK economy surprised – and surprised in a good way,” he said, pointing to gains across telecoms, computer programming and finance, alongside a 0.9% rise in manufacturing output.
“The UK growth story is becoming harder to ignore … there’s clearly something happening here.”
He estimated annualised growth is now tracking at 2.4% and said signs that output is rising even as employment growth stalls suggest productivity gains are “finally starting to come through.”
Deutsche Bank is set to raise its third-quarter growth forecast to 0.4% quarter-on-quarter from 0.1%, he added.
James Smith, developed markets economist at ING, was more cautious, noting that IT, which accounts for just 7% of the economy, has driven roughly a third of annual GDP growth, with capital spending on “other buildings” pointing to data-centre construction.
He also flagged a recurring pattern of stronger first-half growth since 2022 that ING attributes to difficulties seasonally adjusting the data through a period of high inflation. “We still think the GDP figures are overstating the true pace of economic growth,” Smith said, adding he expects momentum to slow through the second half.
Outside the services-led boom, the picture was weaker. Production output fell 0.5% in the three months to July and construction dropped 0.5%, dragged down by an 8.4% slump in public housing new work and a decline in private housing repairs. On an annual basis, construction output was down 2.3%.
GDP was 1.6% higher in July than a year earlier. The ONS said the data are not open for revision in this release; the full series will be revised on Oct. 15 alongside Blue Book 2026 and the quarterly national accounts due Sept. 30.
The Bank of England has said it puts more weight on its own survey-based activity gauge than on the GDP data, which it has viewed with scepticism.
ING expects the BoE to hold rates next week in a 6-3 vote, with rising energy costs so far showing little sign of feeding into broader inflation.