UK GDP: Is the UK economy getting an AI boost? GDP again surprises on the upside

The UK economy is proving more resilient than expected, with AI-related activity potentially providing a modest but increasingly coherent boost despite high oil prices and persistent economic weakness.

• Monthly GDP rose 0.1% in August after an upwardly revised 0.4% increase in July, while consensus had expected a 0.1% contraction.
• Rolling three-month growth accelerated from 0.5% to 0.7%, and GDP growth could reach 0.7% quarter-on-quarter in Q3 if September output is flat, above the Bank of England staff forecast of 0.4%.
• August services output was flat, production increased 0.8%, and construction fell 0.2%; wholesale, retail, and professional, scientific and technical activities led services growth.
• Over the latest three months, GDP was 1.8% higher than a year earlier, with computer programming, consultancy and related activities contributing 0.32 percentage points to growth.
• The Bank of England is expected to focus primarily on inflation and labour-market data, but resilient GDP makes it harder to rely on weak activity to contain inflation; the authors already expect a November rate hike.

Takeaway: Stronger-than-expected growth may challenge the prevailing pessimism about the UK and marginally increase the case for a November rate hike, although inflation, labour-market conditions, high bond yields and limited fiscal headroom remain key constraints.