Deutsche Bank’s Chief UK Economist, Sanjay Raja, reports that the United Kingdom's GDP data for July exceeded expectations, with output rising by 0.4% month-on-month. This growth was broad-based, with the services sector increasing by 0.4% m/m, the production sector by 0.2% m/m (including a 0.9% m/m rise in manufacturing), and construction output up by 0.1% m/m [1].
A key driver of this expansion was the information and services sector, particularly those linked to artificial intelligence (AI) capital expenditure. Within this sector, telecoms grew by 1.1% m/m, computer programming and consultancy services by 3.5% m/m, and information services activities by 1.1% m/m [1]. Deutsche Bank highlights that these gains reflect a strengthening trend in UK growth and productivity, prompting the bank to upgrade its near-term GDP projections for Q3 and annual growth [1].
Annualised growth is now tracking at 2.4%, with both households and businesses maintaining spending levels despite ongoing energy shocks affecting disposable incomes [1]. Deutsche Bank now expects summer GDP growth to be four times larger than previously forecasted, revising its Q3-26 GDP expansion estimate from 0.1% q/q to 0.4% q/q [1]. The bank anticipates that other forecasters will also raise their projections in response to the latest data [1].
CONCLUSION
The UK economy delivered a strong upside surprise in July, led by robust gains in AI-driven services and broad-based sectoral growth. Deutsche Bank has upgraded its growth outlook, signaling increased optimism for the near-term UK economic trajectory. Market participants are likely to view this as a positive signal for UK growth prospects.