UK growth helped by World Cup and warm weather

The Malta Business Weekly - - INTERNATIONAL -

The UK econ­omy grew more strongly than ex­pected in July as the heat­wave and World Cup boosted the re­tail sec­tor.

The Of­fice for Na­tional Statistics said the econ­omy grew by 0.3% in July, and by 0.6% over the three months to July - the fastest pace in al­most a year.

"Ser­vices grew par­tic­u­larly strongly, with re­tail sales per­form­ing well, boosted by warm weather and the World Cup," said Rob Kent-Smith from the ONS.

The con­struc­tion sec­tor ex­panded but in­dus­trial out­put con­tracted.

"The dom­i­nant ser­vice sec­tor again led eco­nomic growth in the month of July with en­gi­neers, ac­coun­tants and lawyers all en­joy­ing a busy pe­riod, backed up by growth in con­struc­tion, which hit an­other record high level," said Mr Kent-Smith.

The 0.6% growth rate for the three months to July was at the fastest since Au­gust 2017, the ONS said, and marks a pick-up from the 0.4% rate seen in the three months to June.

The data comes ahead of the Bank of Eng­land's mone­tary pol­icy meet­ing on Thurs­day when in­ter­est rates are not ex­pected to change. They were raised in Au­gust, for only the sec­ond time a decade, to 0.75%.

John Hawksworth, chief econ­o­mist at PwC, said the lat­est data jus­ti­fied the de­ci­sion to raise rates last month. How­ever, he re­mained cau­tious due to the pos­si­ble im­pact of Brexit.

"Look­ing ahead... the long hot sum­mer could give way to a stormy au­tumn as Brexit-re­lated un­cer­tainty leads busi­nesses to de­fer ma­jor in­vest­ment de­ci­sions and sub­dued real wage growth weighs on con­sumer spend­ing," he said.

The ONS pub­lished a string of data along­side the GDP es­ti­mate: • The ser­vices sec­tor - which makes up 80% of the econ­omy - grew 0.6% in the three months to July, fu­elled by the growth in re­tail and whole­sale trade on the back of the joint hottest sum­mer on record for the UK.

• In the three months to July the con­struc­tion sec­tor ex­panded 3.3%, the high­est three-month rate since Fe­bru­ary 2017, and driven by re­pair and re­cov­ery work. On the monthly mea­sure, growth was 0.5%.

• In­dus­trial out­put con­tracted in the three months to July by 0.5% even though the min­ing and quar­ry­ing sec­tors grew. The monthly out­put fig­ure fell by 0.2%, held back by the phar­ma­ceu­ti­cal sec­tor.

• The to­tal trade deficit in goods and ser­vices nar­rowed to £3.4bn in the three months to July. For July it­self, the deficit shrank to just £111m.

Yael Selfin, chief econ­o­mist at KPMG UK, said there had been a "solid start" to the third quar­ter but that each of the sec­tors showed a mixed pic­ture.

"Un­cer­tain­ties and risks around Brexit are likely to make the Bank of Eng­land par­tic­u­larly cau­tious dur­ing the crit­i­cal months ahead. We ex­pected a pause be­fore in­ter­est rates are raised by 0.25% in Novem­ber 2019 to 1%," she said.

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