There’s a danger that the UK economy slows later this year, points out Andrew Hunter, senior economist at Moody’s Analytics:

“The 0.4% rise in U.K. GDP in the second quarter was slightly stronger than we expected and suggests the economy has remained resilient to the surge in energy prices.

Adding to the positive news, growth was driven by solid gains in household consumption and business investment, and included a healthy 0.3% monthly rise in output in June, suggesting momentum was sustained as the quarter progressed.

That said, it is worth remembering the repeated pattern in recent years of strong growth in the first half of the year being followed by a sharp slowdown in the second, and the downside risks—ranging from the U.S.-Iran conflict to pressures on the U.K.’s fragile public finances—remain high. Overall, we continue to forecast more modest growth over the rest of 2026. ”

Although the UK economy recorded decent growth in July, that doesn’t take the economic pressure off UK households.

Yael Selfin, chief economist at KPMG, cautions:

“A strong July provides a robust start to the third quarter, although weakness in consumer-facing sectors points to softer growth.

“Despite strong activity in July, the headline growth figure masks a weaker picture for households. Consumer-facing services contracted in July, as retail and hospitality activity fell following earlier increases in activity in the summer. Higher energy and fuel prices are likely to place further pressure on household budgets, while elevated mortgage rates will continue to weigh on housing activity and wider consumer spending.

Economists are reacting favourably to today’s forecast-beating UK GDP data, showing the economy grew by 0.4% in July.

Paul Dales, chief UK economist at Capital Economics, is hopeful that AI could prove to be a longer-lasted support to real activity, saying:

The strong 0.4% m/m rise in real GDP in July (consensus and CE forecasts both 0.0%) suggests that the resilience of the economy in the first half of the year continued into the second half. But higher energy prices and borrowing costs will soon take a bigger toll on real activity, especially if this week’s big leaps are sustained.

Ben Jones, CBI senior lead economist, says Britain’s economy has been more resilient to the Iran war than expected:

“Stronger-than-expected growth in July suggests that the economy carried some of its first-half momentum into Q3.

“But although the economy has proved more resilient to the fallout from the Middle East conflict than initially seemed likely, the second half of the year looks a bit more challenging. Higher household energy bills are beginning to bite, while volatile energy markets and a global bond-market sell-off are adding to uncertainty and pushing up borrowing costs.

Richard Carter, head of fixed interest research at wealth managers Quilter Cheviot, warns that future growth will be ‘hard to come by’:

“Having bathed in sunshine for the vast majority of the month, and England experiencing a run to the World Cup semi-finals, the UK economy bucked expectations with solid growth of 0.4% for July. Growth was experienced in all three sectors, with services continuing to do much of the heavy lifting, although this masks a somewhat more concerning three-month picture for production and construction.

“The concern was that the UK was likely to experience another year when the economy runs out of steam when it comes to growth. After a better than expected first half last year, the economy spluttered to a halt in the latter half. But tentative signals are that things may be different his time around, despite the geopolitical situation showing no sign of abating. Growth is going to be hard to come by so this may not last, especially as activity is likely to stall ahead of the Budget. Indeed, there appears little consistency in the growth experienced by the UK right now, with today’s decent rise coming off the back of a contraction in April (-0.1%), no growth in May (0.0%) and a modest return to growth in June (0.3%).

England’s sensational run to the third-fouth playoff in the Men’s football world cup, and the heatwave, both affected the UK economy in July, the ONS says.

But computer programming was a major factor behind July’s growth, as the AI boom pushed up activity.

Here’s ONS director of economic statistics Liz McKeown explaining why the economy grew by 0.4% in July:

“Growth remained relatively robust in the latest three months, as ongoing strength in the services sector was only partially offset by falls in both production and construction.

“Within services, computer programming was the largest contributor, continuing the strong growth seen throughout the year, with evidence that businesses involved with AI and related technologies helped to boost this sector.

“Continuing recent trends, research and development and rental and leasing also helped drive growth, while wholesaling saw a notable fall.

“Looking at the latest month, services also drove growth in July, with computer programming again making the largest contribution. Separately, 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.”

Newsflash: The last month of Sir Keir Starmer’s premiership ended with stronger than forecast growth.

New data from the Office for National Statistics shows that the UK economy expanded by 0.4% in July alone, smashing forecasts that the economy would stagnate during the month.

That follows growth of 0.3% in June 2026 and no growth in May 2026.

The ONS says the growth in July was because of rises of 0.4% in services, of 0.2% in production and of 0.1% in construction.

More to follow…

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

We’re about to learn how the UK economy fared in July, during the summer heatwave.

July’s GDP report is expected at 7am. And economists are not optimistic there was much growth during the month – the concensus forecast is that GDP will be unchanged compared to June,

Over the last three months, that would slow growth to 0.3%, down from 0.4% in April-June, highighting the economic challenges facing chancellor John Healey.

A poor GDP report could add to jitters in the markets, where government bonds suffered another sell-off yesterday.

This sell-off pushed the yield, or interest rate, on 10-year UK government bonds to over 5.37% – the highest cost of borrowing since 2007.

The agenda

• 7am BST: UK GDP report for July

• 7am BST: UK trade report for July

• 1.30pm BST: US CPI inflation report

• 3pm BST: University of Michigan’s US consumer confidence report