PoundSterlingLIVE - The UK economy was firmly back in growth territory in June according to the latest GDP figures from the ONS which also revealed a solid uptick in quarterly and annual growth.
The British Pound jumped in an initial reaction to news the economy grew 0.5% in the month of June, overturning May's -0.1% shrinkage, and beating expectations for a reading of 0.2%, with the ONS saying a rebound in production was largely behind the surprise.
The quarterly data roundly beat expectations with the second quarter seeing growth of 0.2%, which was more than the flat 0% the market expected and up on the first quarter's 0.1%.
In the year to the end of the second quarter, the economy grew 0.4% said the ONS, which was more than double the rate of the first quarter and expectations for 0.2%.
There was further good news with both industrial and manufacturing production returning to growth in June while business investment jumped an unexpected 3.4% in the q/q in the second quarter, surpassing expectations for 0.8% growth.
The GBP/EUR exchange rate rose to 1.1560 on the back of the release - from 1.1534 prior - as the data suggests the Bank of England can proceed with another rate hike in September, and potentially November, on the basis the economy is thus far handling higher interest rates.
The Pound to Dollar rose from 1.2684 to 1.27.
"The UK economy continues to surprise on the upside, evidenced by GDP unexpectedly rising through the second quarter. This is a feature we are seeing around the world and the UK is joining in. It gives the Bank of England a headache though, they may well have been thinking about pausing interest rate increases soon, but this data will make that more difficult," says Neil Birrell, Chief Investment Officer at Premier Miton.
Service output grew 0.2% in June 2023, following no growth in May 2023, unrevised from the previous publication, but it was production that was the largest contributor of growth as output grew by 1.8% in June 2023, following a fall of 0.6% in May 2023. This was the largest contributor to the growth in GDP in June 2023 and the strongest growth seen since August 2020 said the ONS.
Service output grew 0.2% in June 2023, following no growth in May 2023, which was unrevised from the previous publication.
The ONS said monthly GDP is now estimated to be 0.8% above its pre-COVID-19 levels (February 2020) as services showed 0.1% growth in the three months to June, while production grew by 0.7% and construction grew by 0.3% over this period.
An original version of this article can be viewed at Pound Sterling Live
