"While there was a marked bounce back in July, the economy is still languishing way below pre-pandemic levels with so many sectors of the economy suffering from a drop in demand."
The increase follows a record fall of 20.0% in April, before growth of 2.4% in May and 8.7% in June.
July's GDP is now 18.6% higher than its April 2020 low. Despite this, the level of output did not fully recover from the record falls seen across March and April and was still 11.7% below the levels seen in February, before the full impact of the Covid-19 pandemic.
GDP fell by 7.6% in the three months to July, with declines across all main sectors of the economy.
ONS director of economic statistics, Darren Morgan, said: “While it has continued steadily on the path towards recovery, the UK economy still has to make up nearly half of the GDP lost since the start of the pandemic.
“Education grew strongly as some children returned to school, while pubs, campsites and hairdressers all saw notable improvements. Car sales exceeded pre-crisis levels for the first time with showrooms having a particularly busy time.
“All areas of manufacturing, particularly distillers and car makers, saw improvements, while housebuilding also continued to recover. However, both production and construction remain well below previous levels.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, added: "While there was a marked bounce back in July, the economy is still languishing way below pre-pandemic levels with so many sectors of the economy suffering from a drop in demand.
"Consumer confidence has taken a battering and with the fresh tightening of social distancing rules once again, it’s likely to take another hit.
"Already we have seen how newly imposed quarantine rules have affected the travel industry with British Airways’ owner IAG and Easyjet announcing more flight cancellations this week due to a fall in bookings and Ryanair calling the upcoming winter ‘a write off’.
"Given signs that the summer’s recovery may be faltering, the unwinding of the job retention scheme will add another huge spanner to the works, potentially causing fresh waves of mass redundancies, putting pressure on household incomes and causing another spiralling down in consumer demand. It’s unsurprising that calls for the extension of the government supported furlough scheme for sectors hit the hardest are coming thick and fast."
