UK Economy Grows 0.4% in July as AI-Linked Services Expand

Summary

The UK economy grew 0.4% in July, according to figures from the Office for National Statistics, after expanding 0.3% in June and exceeding economists’ forecast of no growth. Services output rose 0.4%, led partly by administrative services, computer programming and consulting. The ONS said many businesses reporting the largest turnover in July were involved in artificial intelligence and cloud computing, while economists linked strong performance in professional services, information technology and administrative services to AI exposure and productivity-related spending. Industrial production also increased 0.2%, as manufacturing growth offset declines in mining and electricity and gas supply. GDP grew 0.4% in the three months to July, matching the previous three-month period. The result came despite higher energy costs and interest-rate pressure associated with the Iran war and rising oil prices. Markets now expect four quarter-point UK rate increases over the next year, although rates were expected to remain at 3.75% at the next meeting. The stronger figures improve the position of Chancellor John Healey ahead of his 28 October budget, but economists warned that the longer-term outlook remains weaker and that higher debt costs could reduce fiscal headroom. The ONS also cited the summer heat and the FIFA World Cup as factors affecting activity in some industries.