Official figures released on September 11 by the Office for National Statistics show that the UK's gross domestic product grew by 0.4% month-on-month in July, comfortably ahead of market expectations which had pointed to no growth at all. The services sector continued to act as the primary engine of expansion, with computer programming making the single largest contribution, boosted by faster growth among companies specializing in artificial intelligence and related technologies.
Following a flat reading in May and a 0.3% increase in June, the UK economy advanced by a further 0.4% in July. Services output also rose by 0.4% during the month, serving as the main source of overall economic growth. Liz McKeown, director of economic statistics at the ONS, noted that computer programming was the biggest driver of services growth in July. Business surveys collected by the statistics agency indicate that firms engaged in artificial intelligence and associated technology work helped propel the sector forward.
Research and development activities, along with rental services, also maintained their upward trajectory during the month, while the wholesale sector recorded a notable decline. Unusually hot weather and the men's football World Cup influenced activity across certain industries, although the effects were mixed, with some businesses benefiting from these factors while others saw their operations disrupted.
Production and construction sectors remained relatively weak, with output in both areas contracting during July, partially offsetting the gains seen in services. On an annual basis, UK GDP was 1.6% higher in July compared with the same month a year earlier. Over the three months to July, the economy grew by 1.3% year-on-year.
The UK economy expanded by 0.4% quarter-on-quarter in the second quarter of this year, a slight deceleration from the 0.6% recorded in the first quarter. While the economy continues to grow, the overall pace remains moderate. Data previously compiled by the House of Commons Library showed that the UK's second-quarter growth rate of 0.4% matched that of the United States, exceeded Germany's 0.3%, and came in ahead of France, where output was flat over the same period.
The stronger-than-expected monthly reading indicates that the UK economy has carried some momentum into the third quarter, performing better than the stagnation that analysts had anticipated. However, monthly GDP figures are prone to volatility from weather conditions, sporting events, and sector-specific fluctuations, meaning they should not be interpreted as a standalone indicator of longer-term trends.
Looking at the composition of growth, the current expansion remains concentrated in the services sector, with computer programming and AI-related businesses showing particular strength, while production and construction continue to weigh on overall performance. Whether the UK economy can sustain its current growth rate will depend on the durability of services expansion and the ability of other industries to gradually recover.