UK economy grew despite Trump tariffs causing three-year low in US goods exports – business live

Live, rolling coverage as surprise GDP acceleration in June helps quarterly output beat expectations, while eurozone industrial production slumps

The second-quarter UK GDP figures count as a major beat", according to Andrew Wishart, senior UK economist at Berenberg, an investment bank. That is economist-speak for data that will prompt a rethink of the narrative around the economy - and he added there may be good news on productivity as well.

Wishart wrote in a note to clients:

It now looks like the UK economy weathered US tariffs and domestic tax hikes remarkably well in the second quarter.

With the economy benefitting from fiscal support and showing little sign of interest rates slowing it down, the strong data support our view that the Bank of England will wait until next year before cutting bank rate again.

Improving growth at the same time as the sector cuts staff numbers implies that operators have been able to make significant improvements in productivity. While the hotel and restaurant sector is an extreme example, an economy-wide decline in employment alongside reasonable GDP growth suggests that productivity growth is improving. At the margin, that will give the government's official forecaster, the Office of Budget Responsibility, some confidence that it is right to assume a recovery in productivity growth after a dismal three years. If so, the government will not need to raise taxes by anywhere near as much this autumn as the most pessimistic analysts claim in the press.

The optics of a resilient" economy allow for BoE patience as headline inflation bobs around between 3.5% and 4% in the coming months. That said, we think softer underlying details and the likely softening of the growth momentum from here keep a November cut in play.

Interest rates are too high for a sustained and broad-based growth uptick. If the government ensures that the autumn budget does not repeat the 2024 slew of inflation-boosting policies, and measured inflation falls through 2026, we think the [Bank's rate-setting monetary policy committee] will acknowledge the need to cut rates amid the ongoing build-up of slack. If that is not the case, we will see more of the same stagflationary dynamics, we think.