Despite ongoing geopolitical tensions and inflation worries, the UK economy managed to just about muddle through in June, with monthly GDP up by 0.3% for the month and quarterly GDP up 0.4%.
While this is a slight decline from the 0.6% three-month growth to May, it still marks the seventh consecutive period of three-month growth in the UK.
Services continued to carry the bulk of this, with output growing 0.5% while production output was flat and construction output was only up by about 0.3%
Danni Hewson, head of financial analysis at AJ Bell, said: “June might well prove to be the last real sweet spot for the UK economy this year.
“The start of the World Cup had food and drinks makers rushing to stock up supermarket shelves and fill pub cellars ahead of a summer of excitement and revelry that didn’t quite end in triumph – but did boost sentiment.”
Richard Carter, head of fixed income research at Quilter Cheviot, added: “While the growth is nothing to write home about, it is perhaps reflective of the fact that the economy was in a more robust shape than thought given what the first six months have thrown up so far.”
See also: etoro: More than 80% of UK investors are confident about their investments
However, analysts warned investors that just because growth has been resilient so far does not necessarily mean it will last.
Tomasz Wieladek, chief European macroeconomist at T.Rowe Price, said: “Overall, the performance of UK GDP in Q2 appears to be strong, as if the conflict in the Middle East left the economy completely unaffected.
“But this is likely too good to be true, with UK GDP data plagued by seasonality issues in recent years.”
UK economic growth tends to be much stronger in the first half of the year than the latter half, he explained.
AJ Bell’s Hewson added: “The UK economy has fallen into a pattern over recent years, with growth front-loaded to the start of the year but petering out in later months despite the historically significant ‘golden quarter’ for retailers and hospitality businesses in the lead-up to Christmas
“Although the global economy has held up remarkably well so far despite the surge in the oil price, the real test will come if the winter is harsh and energy demand meets supply shortages.”
Aaron Bright, investment analyst at IG, expressed concerns about the lack of production and reliance on a one-off event like the World Cup, which was “no foundation for consistent, durable growth”.
“With firms still flagging economic uncertainty, geopolitical ramifications and energy costs as their biggest worries, this looks less like an economy shifting up a gear and more like one gently running out of road,” Bright said.
Derrick Dunne, CEO of YOU Asset Management, said that looking forward: “The most important issue to now watch for is what happens next with inflation.”
Better-than-expected economic performance will, in theory, put a floor under what the Bank of England does to the base rate, but the bank and IMF are both forecasting higher inflation, which indicates some pessimism, he explained.
“Whether the MPC chooses to hike will come down to crucial readings in the latter half of the year,” Dunne concluded.
See also: Bank of England holds rates at 3.75% in widely expected decision
