UK income growth revised upwards as markets hail ‘resilient’ economy

UK household income rose by 1.1% between January and June, a stronger pace than previously estimated, as the Office for National Statistics revised second‑quarter GDP growth to 0.5% from 0.4%. The upward revision placed the UK’s growth rate on par with the United States for the first half of the year and near the top of the G7, trailing only Canada’s 1.3% growth. The data also showed business investment up 1.8% in the quarter and 5.2% higher than a year earlier, while the household savings rate edged up to 8.8% from 8.6% in the first three months.

Analysts linked the improved figures to a “Burnham bounce” in confidence following the Makerfield by‑election, which paved the way for the former Manchester mayor to become prime minister, and to the resilience of the economy amid the US‑Israel war on Iran, surging energy prices and higher borrowing costs. Research director Kathleen Brooks highlighted stronger services growth, rising household spending, robust business investment and better trade performance as key drivers, noting that the UK’s service‑based economy performed better than expected. The revisions also boosted Chancellor John Healey’s standing ahead of his first budget, with fund manager Thomas Watts calling the numbers “yet more positive news for the new administration.”

Currency markets responded positively, with sterling reaching a six‑week high against the euro and a one‑week high of $1.3292 against the dollar, while UK government bond yields slipped modestly. Traders speculated that the stronger growth could prompt the Bank of England to consider higher interest rates to curb inflation, which remains at 3.1% above the 2% target. The data suggest the UK economy has withstood external shocks, but ongoing volatility in oil and gas prices and uncertainty over a peace settlement keep the outlook cautious.

⚡ Effects Interpreter