UK GDP rose 0.4% month-on-month in June, following falls of 0.1% in April and May and above market expectations of 0.1% growth.
GDP is estimated to have grown by 0.3% in the three months to June, however this marks a slowdown from the more robust figure of 0.7% recorded in Q1.
Economists were split on what the better-than-expected Q2 figures mean for future growth, with some saying it signals economic momentum and others cautioning that the underlying pace of growth is weak and is likely to remain so through the second half of the year.
Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services, said: “Today's GDP data will provide some relief for Chancellor Rachel Reeves and the Treasury. A stronger than anticipated rebound in activity over June helped avoid a downbeat outcome in Q2, although the economy’s pedestrian pace is likely to keep the public finances under pressure and threaten another tough Budget in the autumn.
“Today’s Q2 data puts the UK economy on track to grow – perhaps by 1.2% or 1.3% over 2025, slightly above the Office for Budgetary Responsibility’s 1.0% growth forecast projected at the Spring Statement in March. Whilst mildly encouraging for Chancellor Reeves, any upward growth revision from the official forecaster is unlikely to head-off the need for another tight Budget in the autumn.
“Last week the Bank of England cut the base rate for a fifth time, to 4.00%, but the razor-edge vote and accompanying commentary made clear that any future rate cuts will be determined more by the evolution of wage and inflation trends than by the economy’s softness.”
Derrick Dunne, CEO of YOU Asset Management, commented: "Finally, some good news for the beleaguered Chancellor. The latest round of GDP data appears to prove that the UK’s weakness may be fleeting rather than fundamental, impacted by one-off factors such as Trump tariffs and tax changes.
"Nevertheless, both the Chancellor and the Bank of England still have tough challenges ahead. It will help Reeves’s sums ahead of the October budget, but she still has the challenge of balancing the UK’s wayward finances. She may struggle to raise taxes without denting this nascent economic recovery. Borrowing more or cutting spending are toxic to the bond market and Labour backbenchers respectively.
"The Bank of England has to weigh still-buoyant wage growth with ongoing fragility in the broader economy. Inflationary pressures are still evident, making further interest rate cuts difficult, but the economy would welcome the boost rate cuts would provide. The next few months will see plenty of head-scratching for policymakers.
"Nevertheless, there are reasons why the UK economy could sustain its recent strength. The impact of the flurry of trade deals – with the US, India and Europe in particular – has not yet shown up in the data. Wage growth should help keep the consumer economy alive, while shifts in planning regulation and other initiatives should revive the construction sector.
"However, these will take time to come through. In the meantime, the UK is muddling through better than many expected."
Scottish Friendly savings expert Jill Mackay, agreed: "The weather is hotting up in many places across the UK, and so, it seems, is the UK economy, with a surprisingly strong reading for UK GDP. It reverses the recent run of weaker data and suggests it may have been caused by one-off factors such as tariffs and changes to stamp duty.
"It will be a relief for the Chancellor looking ahead to the October budget, making the sums a little easier. Nevertheless, options for balancing the books still look limited: raise taxes too far and it could send the economy backwards again, raise borrowing and bond yields could spike and spending cuts could face another backbench revolt.
"There are reasons why UK growth could be sustained, however. Wage growth is still strong, which is giving households more spending power. Equally, the UK may start to reap the benefits of recent trade deals over the coming months, which may fuel growth. The recent rate cut could also generate marginal improvements in the economic outlook.
"The one down side is inflation, which is also running as hot as the weather. Ultimately, households should try and make hay while the sun is still shining, building a financial cushion. This is likely to be the greatest defence if the economy turns cold again."
Nicholas Hyett, Investment Manager at Wealth Club, said: "GDP growth in June was a fair bit stronger than the market had been expecting, put that together with some significant upward revisions to April’s numbers and overall growth for the quarter wasn’t bad at all.
"After the tariff induced volatility earlier in the year, the production sector has bounced back, helped by increased defence spending in certain sectors, while the motor industry enjoyed a month of strong sales amid growing demand for electric vehicles.
"The government can probably take some credit – with the UK-US trade deal coming into force at the end of June providing some much-needed certainty to UK exporters.
"However, it does raise some interesting questions for the Bank of England – where interest rate decisions are on a knife edge. An annualised GDP growth rate of 1.26% is hardly spectacular, but might be better than risking an inflationary overshoot – especially with 4% inflation expected in September anyway. Better leave the economy sputtering into life than risk turbo charging price rises with further interest rate cuts."
Luke Bartholomew, deputy chief economist at Aberdeen, added: “The economy performed a little better than expected over Q2, with activity growth recovering well in June. However, the underlying pace of growth is weak and is likely to remain so through the second half of the year, as real incomes are squeezed by higher inflation and fiscal policy is set to tighten in the autumn Budget. For now though, this report is likely to confirm the impression among Bank of England policymakers that there is no rush to cut rates again soon, and the September meeting is very likely to see interest rates kept on hold.”
