UK GDP expands 0.7% in Q3, fastest growth in over two years
The Office for National Statistics reported a 0.7% rise in UK GDP for July-September, the strongest quarterly increase since early 2024, driven mainly by services.
The Office for National Statistics said the UK economy grew by 0.7% in the third quarter, the quickest expansion in two and a half years, with most of the gain coming from the services sector. Monthly data showed a 0.2% rise in September, beating forecasts of zero growth, while August was revised to flat growth.
"The UK is showing standout resilience," chancellor John Healey said.
Deutsche Bank chief UK economist Sanjay Raja noted that the economy is expanding at an annualised rate just above 2.5%, the best performance for the first three quarters since the pandemic rebound, and that the UK had briefly lost its position as the fastest-growing G7 economy to the United States.
The services sector grew by 0.9% in the quarter, supported by a 0.1% increase in production, while construction, which accounts for about 6% of activity, contracted and weighed on overall growth. ICAEW chief economist Suren Thiru described the figures as "strikingly strong" and highlighted the role of artificial-intelligence-driven investment in the services sector.
"The third quarter showcased the continued resilience of households and firms. Businesses ramped up investment amid an AI boom, while stronger consumer spending suggests households continued to draw on savings to support consumption despite rising inflation," Thiru added.
Energy costs remained high, with oil prices above $100 a barrel in September and wholesale electricity prices roughly double the previous year’s level. The Office for Budget Responsibility’s earlier forecast of 1.2% annual growth now appears outdated as actual growth exceeds expectations.
The Bank of England recently raised interest rates to 4% and may consider further hikes in December, with analysts saying the robust data support the case for additional tightening.
"These robust figures help keep a December interest rate rise firmly on the table by reinforcing policymakers’ view that the economy remains resilient enough to cope with another rise in borrowing costs," Thiru said.