THE economy grew by 0.4% in July in a boost to Prime Minister Andy Burnham, figures published this morning reveal.
The Office for National Statistics said the economy grew in July following growth of 0.3% in the three months to June and no growth in May.
The news will come as a relief to the Government just weeks before the Budget as economists had predicted there would be no growth in July.
Officials said this morning that a rise in computer programming was the largest contributor to boosting GDP.
They added that there is evidence that businesses involved with AI and other technologies helped to boost the sector.
Liz McKeown, director of economic statistics at the ONS, said: “Growth remained relatively robust in the latest three months, as ongoing strength in the services sector was only partially offset by falls in both production and construction.”
She added that, as in June, some businesses said warm weather and the World Cup had affected their activity by boosting some while creating challenges for others.
GDP is one of the main indicators used to measure the performance of a country’s economy.
When it goes up, it means the economy is doing well.
When it falls, it means the economy has shrunk.
No growth is also bad news for the Government.
Today’s figures will be welcomed by Chancellor John Healey, who is set to announce his first Budget on October 28.
But the economy is still under pressure as the conflict in the Middle East continues to put strain on global economies.
Oil prices have risen to above $100 a barrel, which could increase inflation worldwide.
Inflation, heavy Government borrowing and worry about its fiscal plans have led to a sell-off in the UK bond market.
Fears have grown that the Chancellor could be forced to increase taxes or cut spending in the Budget in response.
Chancellor of the Exchequer, John Healey MP said: “Britain’s economy is demonstrating a welcome resilience, despite serious global uncertainty.
“Our growth although still fragile was the fastest in the G7 in the first half of the year.
“But, the conflict in the Middle East does have impacts here at home – from the cost of the weekly family shop to the cost of government borrowing.
“We are shifting power to local communities to generate growth in more places and backing business to succeed with more investment, innovation and jobs.
“This is the route to raising living standards and delivering good growth in every postcode.”
What it means for your money
GDP measures the economic output of companies, individuals and Governments.
If it is rising steadily, but not too much, it’s a sign of a healthy and prosperous economy.
This is because it usually means people are spending more, the Government gets more tax and businesses get more money which then means pay rises for workers.
When GDP is falling, it means the economy is shrinking which can be bad news for businesses and workers who face pay cuts or even losing their job.
The Bank of England (BoE) also uses GDP and inflation as key indicators when determining the base rate.
The base rate decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.
If GDP is low, the BoE cuts its base rate in order to encourage people to spend and invest money.
If it is higher, the BoE may keep its base rate higher in order to keep inflation in check.
Experts suggest that today’s figures may cause the BoE to adopt a wait and see approach when its Monetary Policy Committee meets next month.
Suren Thiru, ICAEW chief economist, said: “A September rate rise still looks unlikely as most policymakers remain hopeful that a sluggish economy will ultimately help bring inflation under control, despite escalating US-Iran tensions.”
