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Warm weather and World Cup boosts UK growth

Warm weather and World Cup boosts UK growth

Warm weather and the World Cup helped the UK economy grow by a better than expected 0.6 per cent in the three months to the end of July.

Economic growth in the first quarter of the year was 0.2 per cent and in the second quarter it was 0.4 per cent.

The Office for National Statistics (ONS) attributed the increasing growth to a strong performance from the services sector, with retail sales performing particularly well because of the heat wave and the World Cup, where England performed better than expected to reach the semi-finals.

Samuel Tombs, an economist at Pantheon Macroeconomics in London, said policy makers would probably "look through" the better than expected data because they were driven by such specific factors.

He pointed to the fact builders took advantage of the warm weather in July to catch up on work they were unable to perform when weather was poorer earlier in the year.

When the ONS produced data for the first three months of the year which showed the economy grew at just 0.1 per cent, it had played down the effect of poor weather conditions and said businesses backed up this analysis.

But Mark Carney, governor of the Bank of England, dismissed this and said the method the ONS used to determine the impact of poor weather was faulty, and he expected GDP growth to be revised upwards, which it later was.

Ian Forrest, investment research analyst at The Share Centre said: "The services sector saw good growth in July and the ONS picked out engineers, accountants and lawyers as especially busy, while the construction sector also saw a good recovery in activity.

"Production and manufacturing fell back but they are relatively small parts of the overall economy, and the picture presented by today’s data suggests that the third quarter is building on the momentum seen in the second quarter rather than reverting to the weakness seen in the first quarter."

He noted that sterling rose only moderately as a result of this positive data, and said this was because the market attributed the better data to temporary factors such as the weather, rather than the overall health of the UK economy.

david.thorpe@ft.com