Economic growth exceeds expectations in July
The UK economy grew quicker than expected in July with a growth rate of 0.3 per cent.
There was flat growth in the three months to July which countered the 0.2 per cent contraction over April to June.
The news also saw a rise in the value of sterling, with the pound up by 0.6 per cent against the dollar to $1.2357.
The services industry helped leverage the growth, but the sector as a whole remains weak according to the Office for National Statistics.
Other industry leaders have echoed the ONS’ concerns.
Suren Thiru, chief of economics at the British Chambers of Commerce, said: "Although there was a rise in GDP between June and July, the zero growth recorded on the underlying three-month measure points to an economy under pressure from uncertainty over Brexit and weakening global economic conditions.
"The manufacturing sector remains an area of concern, with tightening cash-flow, concerns over disrupted supply chains and weakening demand in key markets weighing on activity in the sector.”
The purchasing managers’ index from IHS Markit/CIPS suggested that the services industry, which accounts for 80 per cent of the economy, only yielded minimal growth in August.
This saw fears of a recession grow but the latest GDP numbers have provided reassurance according to Samuel Tombs, head of UK economics at Pantheon Macroeconomics.
Tombs said: "The pick-up in GDP in July is a reassuring sign that the economy is on course to grow at a solid, perhaps even above-trend rate in Q3.
"The upside surprise came from the services sector, which displayed broad-based strength and did not seemingly benefit from any one-off stimuli”.
With manufacturers in the automotive industry having brought their annual shutdown forward ahead of the original Brexit deadline for March, Capital Economics' leading expert Paul Dales believes there should be a positive knock-on effect for GDP.
Dales said: "GDP will get a further boost of about 0.2 per cent in August, when car manufacturers will be at work when they are usually on holiday."