UK growth slowed in Q2, but economy finished quarter considerably better than June forecasts had suggested. GDP expanded 0.4% q/q after 0.6% growth in Q1, matching expectations, while annual growth accelerated from 0.9% to 1.2%, beating 1.1% consensus. GDP per head also increased 0.4% q/q, leaving it 1.0% higher than a year earlier. Services remained engine of expansion, growing 0.5% q/q over quarter, alongside a 0.3% rise in construction, while production stagnated.
More encouraging signal came from June. GDP rebounded from 0.0% to 0.3% m/m, versus expectations for a 0.1% decline, reversing some concern that growth was fading sharply after strong start to year. But improvement was concentrated in services, which rose 0.4%, while production contracted -0.2% and construction slipped -0.1%. Manufacturing weakened further from a revised -0.2% to -0.5%, showing that stronger headline GDP still masks considerable divergence across economy.
Overall, the report shows UK economy lost some momentum from Q1 but avoided sharper slowdown feared into quarter-end. Stronger June growth suggests a firmer handoff into Q3, although dependence on services and continuing weakness in manufacturing argue against describing recovery as broad based. For BoE, resilience in headline activity gives policymakers somewhat more room to stay focused on inflation, but GDP data alone are unlikely to materially change near-term policy stance.
Q2 GDP Summary
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| GDP q/q Q2 | 0.4% | 0.4% | 0.6% |
| GDP y/y Q2 | 1.2% | 1.1% | 0.9% |
| Services Output q/q Q2 | 0.5% | — | 0.8% |
| Production Output q/q Q2 | 0.0% | — | 0.2% |
| Construction Output q/q Q2 | 0.3% | — | — |
June GDP Summary
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| GDP q/q Q2 | 0.4% | 0.4% | 0.6% |
| GDP m/m Jun | 0.3% | -0.1% | 0.0% |
| Services Output m/m Jun | 0.4% | — | 0.1% |
| Production Output m/m Jun | -0.2% | 0.0% | -0.7% |
| Construction Output m/m Jun | -0.1% | — | -0.8% |
| Manufacturing Production m/m Jun | -0.5% | -0.3% | -0.2% |
Key Takeaways
- UK GDP slowed from 0.6% to 0.4% q/q in Q2, exactly matching expectations, while annual growth strengthened from 0.9% to 1.2%, beating 1.1% forecast.
- June GDP surprised clearly on upside, accelerating from 0.0% to 0.3% m/m against expectations for a -0.1% contraction.
- Services remained main growth engine, rising 0.5% q/q in Q2 and 0.4% m/m in June.
- Growth was uneven beneath headline, with production flat in Q2 and down –0.2% m/m in June, while manufacturing fell –0.5%.
- GDP per head rose 0.4% q/q and 1.0% y/y, adding a more constructive dimension to headline growth.
- Overall picture is of UK economy slowing rather than stalling, with stronger June activity providing a firmer handoff into Q3.
- For BoE, data modestly support patience by showing economy is holding up better than feared, though weak production prevents a broad-based growth signal.
