The U.K. economy held up better than feared in the second quarter of the year as U.S. President Donald Trump unleashed his trade war on the world.
Gross domestic product rose by 0.3 percent in the three months through June, markedly better than the 0.1 percent expected, the Office for National Statistics said on Thursday, thanks to a sharp rebound in June after two weak months in April and May. Construction output in particular jumped 1.5 percent in June.
Growth was better than forecast but slowed from the first quarter of the year, when GDP rose 0.7 percent.
The figures are preliminary and likely to be revised, but at face value they offer some reassurance to the government that neither the trade war nor the effects of the tax hikes that came into effect in April have stalled the economy yet.
However, the Bank of England leaned on signs of an economic slowdown to justify cutting interest rates last week, even though inflation is projected to rebound to 4 percent by September, double its 2 percent target.
Chancellor Rachel Reeves called the figures a positive development but said: “I know there is more to do to deliver an economy that works for working people — and rewards working people.”
Quarterly growth figures have been heavily distorted this year. Businesses rushed to export as much as possible to the U.S. in the first quarter to avoid the import tariffs that have since come into force, while households similarly rushed to complete house purchases before the end of a stamp duty holiday in April. Activity in both sectors has since weakened as the effect has reversed.
Economists said the breakdown of the figures was slightly less impressive than the headline numbers, with growth largely driven by government spending and inventory changes, while investment fell and private consumption was weak.
The pound edged higher after the news to its strongest level against the dollar in over a month. It had already risen sharply this week after data suggesting that the labor market is still holding up relatively well.
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