Monday 10 September 2018 9:43 am

British economy enjoys surprise July jump in activity to record strongest growth in almost a year

The British economy surprised economists in July as output grew by 0.3 per cent, with a sunny services sector outlook alongside unexpected support from the construction sector contributing to the pick-up.

The three months to July saw GDP expand by 0.6 per cent, picking up from 0.4 per cent growth in the second quarter of April to June, according to figures released today by the Office for National Statistics (ONS).

Growth reached its highest since August 2017 in three-month terms, the ONS's preferred measure of the underlying trend after its recent move to monthly GDP estimates.

The ONS said the services sector benefited from the summer heatwave – a hypothesis disputed by some economists – while the England's better-than-expected performance at the football World Cup supported the pub sector in particular.

Rob Kent-Smith, the ONS's head of GDP, said: “Growth in the economy picked up in the three months to July. Services grew particularly strongly, with retail sales performing well, boosted by warm weather and the World Cup. The construction sector also bounced back after a weak start to the year."

Meanwhile, construction found itself on a steadier footing compared to the beginning of 2018. Victoria Clarke, an economist at Investec, described the construction industry strength as a "surprising source of support".

The data suggest that "the construction sector is holding up more broadly, rather than having simply rebounded after heavy snowfall dampened first-quarter activity", Clarke said.

The surprise GDP strength adds a slight complication to the Bank of England's latest monetary policy decision, to be announced on Thursday, according to analysts at Morgan Stanley. Risks at the meeting at now "tilted towards a more hawkish message", particularly if rising health sector pay pushes up wages, said Jacob Nell and Bruna Skarica in a client note.