LONDON – The UK economy held up better than many had expected in the second quarter, although growth slowed from the pace seen at the start of the year.
GDP expanded 0.4% in the three months to June, in line with forecasts and two-tenths slower than the 0.6% recorded in Q1. Much of the quarter’s growth came in June, when output rose 0.3%, confounding expectations for a 0.1% decline and rebounding from a downwardly revised flat reading in May.
The Office for National Statistics said services were once again the main driver of quarterly growth, expanding 0.5%, while construction rose 0.3% and production was broadly unchanged.
Real GDP per head was estimated to have increased by 0.4% in Q2, 1.0% higher than a year earlier.
Services Drive Q2 Expansion
Breaking down the report, ONS director of economic statistics Liz McKeown said computer programming and advertising continued to perform strongly within the services sector, while wholesale was a notable area of weakness.
“While production was flat across the quarter, manufacturing grew, led by the often-volatile pharmaceutical industry alongside further strength in computer products. This was offset by falls in power generation and sewerage,” she said.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the preliminary figures showed the economy had weathered the energy shock well in Q2, although she cautioned that the resilience was unlikely to last.
“We expect GDP to stagnate in Q3 and grow only modestly in Q4,” Gregory said.
Despite the slowdown, the ONS said this marked the seventh consecutive three-month-on-three-month increase in GDP. Growth in the three months to May was revised down to 0.6% from 0.7%, following an increase of 0.8% in the three months to April.
June Does the Heavy Lifting
Source: ONS
The last month of the quarter proved considerably stronger than many economists had anticipated.
Services output rose 0.4% on the month in June, providing the bulk of the increase in GDP, with some businesses reporting that good weather and sporting events had supported activity.
That strength was partially offset by a 0.2% decline in production and a 0.1% fall in construction.
JPMorgan’s Allan Monks noted that the ONS cited hot weather as having a mixed effect on activity overall, while the World Cup was likely to have provided a temporary boost to some areas of consumer spending.
“One other caveat is that GDP growth in May was revised down by a tenth to flat, as part of annual benchmark revisions. However, momentum heading into Q3 is strong, with the level of output 0.8% annualised above the second-quarter average,” Monks said.
BoE Still Focused on Inflation
At the end of July, the Bank of England voted to leave the Bank Rate unchanged at 3.75%, although three members of the Monetary Policy Committee called for a 25-basis-point increase.
In its latest Monetary Policy Report, the BoE said underlying GDP growth was expected to weaken slightly in coming quarters as subdued momentum persisted and the Middle East conflict weighed on demand.
Inflation remains the more pressing concern for policymakers, with consumer prices expected to rise over coming months as the energy shock feeds through to households and businesses.
Outlook remains uncertain
The stronger June data provide some encouragement heading into Q3, but uncertainty surrounding both the Gulf conflict and the UK’s October Budget could weigh on activity.
“We assume some payback in July with a small GDP decline,” Monks said. “We hence leave our Q3 forecast unchanged at 0.8% annualised for now. But both the GDP data profile and the recent strength in the PMI – especially if sustained in the August flash next week – suggest upside risks to our forecast.”
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- Services keep the economy moving
- June delivers upside surprise
- Weather and World Cup positive factors
- Negative payback at start of Q3 a risk
By Harry Daniels
LiveSquawk News
@HarryDaniels71
12:00 GMT | 13 August 2026
LONDON – The UK economy held up better than many had expected in the second quarter, although growth slowed from the pace seen at the start of the year.
GDP expanded 0.4% in the three months to June, in line with forecasts and two-tenths slower than the 0.6% recorded in Q1. Much of the quarter’s growth came in June, when output rose 0.3%, confounding expectations for a 0.1% decline and rebounding from a downwardly revised flat reading in May.
The Office for National Statistics said services were once again the main driver of quarterly growth, expanding 0.5%, while construction rose 0.3% and production was broadly unchanged.
Real GDP per head was estimated to have increased by 0.4% in Q2, 1.0% higher than a year earlier.
Breaking down the report, ONS director of economic statistics Liz McKeown said computer programming and advertising continued to perform strongly within the services sector, while wholesale was a notable area of weakness.
“While production was flat across the quarter, manufacturing grew, led by the often-volatile pharmaceutical industry alongside further strength in computer products. This was offset by falls in power generation and sewerage,” she said.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the preliminary figures showed the economy had weathered the energy shock well in Q2, although she cautioned that the resilience was unlikely to last.
“We expect GDP to stagnate in Q3 and grow only modestly in Q4,” Gregory said.
Despite the slowdown, the ONS said this marked the seventh consecutive three-month-on-three-month increase in GDP. Growth in the three months to May was revised down to 0.6% from 0.7%, following an increase of 0.8% in the three months to April.
The last month of the quarter proved considerably stronger than many economists had anticipated.
Services output rose 0.4% on the month in June, providing the bulk of the increase in GDP, with some businesses reporting that good weather and sporting events had supported activity.
That strength was partially offset by a 0.2% decline in production and a 0.1% fall in construction.
JPMorgan’s Allan Monks noted that the ONS cited hot weather as having a mixed effect on activity overall, while the World Cup was likely to have provided a temporary boost to some areas of consumer spending.
“One other caveat is that GDP growth in May was revised down by a tenth to flat, as part of annual benchmark revisions. However, momentum heading into Q3 is strong, with the level of output 0.8% annualised above the second-quarter average,” Monks said.
At the end of July, the Bank of England voted to leave the Bank Rate unchanged at 3.75%, although three members of the Monetary Policy Committee called for a 25-basis-point increase.
In its latest Monetary Policy Report, the BoE said underlying GDP growth was expected to weaken slightly in coming quarters as subdued momentum persisted and the Middle East conflict weighed on demand.
Inflation remains the more pressing concern for policymakers, with consumer prices expected to rise over coming months as the energy shock feeds through to households and businesses.
The stronger June data provide some encouragement heading into Q3, but uncertainty surrounding both the Gulf conflict and the UK’s October Budget could weigh on activity.
“We assume some payback in July with a small GDP decline,” Monks said. “We hence leave our Q3 forecast unchanged at 0.8% annualised for now. But both the GDP data profile and the recent strength in the PMI – especially if sustained in the August flash next week – suggest upside risks to our forecast.”