UK economy expanded 0.4% in July, above expectations of no monthly growth

• The prior monthly reading was +0.3%.
• Year-on-year GDP came in at +1.6%, versus a +1.0% forecast.
• The earlier annual reading was +1.1%.
• The full report is available here.

Real GDP advanced 0.4% in the three-month period ending in July versus the three months through April, keeping the recent pace of expansion intact. The gain was the eighth consecutive three-month stretch of growth, though momentum has softened from the 0.6% increase seen in the period ending in May.

Services output climbed 0.6% over the three months, keeping the sector the leading contributor to growth. Production and construction each declined 0.5% over the same stretch.

Month-on-month figures painted a firmer picture. GDP increased 0.4% in July, picking up from 0.3% in June and zero growth in May. Gains were broad across sectors, with services up 0.4%, production up 0.2%, and construction up 0.1%.

On an annual basis, July GDP was 1.6% above its year-ago level. The three-month period to July showed a 1.3% annual increase, lifted by a 1.7% rise in services and a 0.5% gain in production. Construction stayed weak, falling 2.3% from a year earlier.

July's reading, far stronger than anticipated, points to continued momentum in the UK economy despite headwinds from higher borrowing costs and energy prices. All told, the data suggest growth is holding up, which should leave the BoE's tightening bias intact, particularly after the recent spike in oil prices.