GDP grew 0.5% in June and the Q2 rise was a modest uptick from the 0.1% growth seen in each of the preceding quarters. The current GDP remains 0.2% below its pre-pandemic peak from Q4 2019.

A few factors have contributed to this growth. While the Bank of England had projected a 0.1% expansion between the first two quarters, the actual figures proved slightly stronger. Grant Fitzner, ONS chief economist, indicated that factors such as stronger business investment and a reduced trade deficit had contributed to this resilience. 

Several sectors saw notable growth. Manufacturing output surged, with a significant recovery in the auto sector. The pharmaceutical sector also contributed, even though its output is typically volatile. The service sector experienced a 0.1% growth, aided by favourable weather in June that boosted the hospitality industry. Additionally, household spending saw a 0.7% increase, driven by expenditures in sectors like transport, recreation, and restaurants.

The construction sector’s performance exceeded expectations, especially given the influence of rising interest rates on housing. Growth in repair and maintenance outpaced a decline in new building projects. Business investment also saw a substantial 3.4% increase during the quarter, primarily due to investments in air transport.

Martin Beck, the EY ITEM Club’s chief economist, anticipates a slight uptick in momentum for Q3, highlighting falling energy bills and decreasing inflation as positive indicators.

He said: “A return to a normal complement of working days will mechanically boost growth, energy bills fell in July for the first time in almost three years and, relatedly, inflation is coming down, easing financial strains on households and businesses.

“But challenging these positives is the impact of a significant rise in interest rates, which is increasingly feeding through to the economy as fixed-rate mortgages are renegotiated. On balance, the EY ITEM Club thinks the upsides facing the economy, plus offsets to the impact of higher rates on borrowers, including higher interest income for savers, mean the economy should continue to grow. But it will probably be well into 2024 before that growth breaks out of the sluggish holding pattern of the last year or so.”