UK economy returned to growth in July, latest figures expected to show – business live

Key events

Economists at Daiwa Capital Markets said:

After economic output moved sideways in June, we expect a return to expansion in July with growth of 0.3% month on month, which would leave the three-month growth rate unchanged at a solid 0.6%. Growth will in part reflect the pickup in retail sales of 0.5% that month, when a long-awaited improvement in the weather boosted demand.

Surveys also pointed to growth across the services sector as well as construction, while the manufacturing output PMI rose to the highest level in more than two years. So, although factory production grew in June by the most in four months, we expect the expansion in GDP in July to be broad-based.

Introduction: UK economy forecast to have returned to growth in July

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK economy is expected to have returned to growth in July, after flatlining in June.

The latest GDP figures from the Office for National Statistics, out at 7am, are expected to show that the economy expanded by 0.2% in July, after zero growth in June.

Deutsche Bank economist Sanjay Raja, who is predicting a 0.3% rise in GDP in July, said:

What’s driving the increase in output? Mainly, a stronger rebound in services activity, led by a pick up in retail and leisure services. Industrial production output also likely expanded to start the third quarter, lifted in large part by an increase in oil production, and to a slightly lesser extent, manufacturing output. Last but not least, we expect the construction sector to see its third monthly consecutive rise (0.2% month on month).

Where are risks to our nowcast skewed? To the downside, with our modelled estimates having a downward skew relative to our point estimate.

Looking ahead, we continue to see GDP expanding at a steady clip, averaging roughly 0.4% quarter on quarter in the second half. It’s early days, but risks to our quarterly nowcasts are skewed to the upside, raising upside risks to our annual growth projection too.

We are also getting figures for trade and industrial production at the same time.

It’s also US inflation day. The annual headline rate is expected to have fallen to 2.6% from 2.9%, while the core rate, which strips out volatile food and energy costs, is set to have stayed at 3.2%.

Investec economist Ryan Djajasaputra said:

July’s outturn provided further reassurance that inflation remains on a disinflationary path, with the 2.9% print being the first below 3% since March 2021. Early consensus estimates are for a further moderation to 2.6%.

Also today:

The British steel industry is braced for 2,500 job cuts at the Port Talbot steelworks, with thousands more jobs at risk in the UK, as the government prepares a taxpayer-backed deal for the south Wales plant.

The business secretary, Jonathan Reynolds, is expected to outline this morning the details of a rescue deal which will see the government hand the historic Welsh plant’s owners, Tata Steel, £500m to build a new electric furnace – but at the cost of huge redundancies from the closure of its last remaining blast furnace.

Natarajan Chandrasekaran, the chair of Tata Group, told the Financial Times on Tuesday that talks were “going well” and it was “very close” to agreeing a deal.

It is understood the government, which previously promised to “push for job guarantees”, has been unable to protect these jobs, with 2,500 still expected to go in the coming months.

The Agenda