The UK economy unexpectedly grew in July, defying forecasts of stagnation, according to official data released by the Office for National Statistics. Gross domestic product (GDP) rose by 0.2% month-on-month, driven by stronger-than-expected services output and a rebound in construction. The surprise uptick came despite persistent inflation pressures and high interest rates, suggesting resilience in domestic demand.

Economists had widely predicted a flat or slightly negative reading, making the result a notable upside surprise. The FTSE 100 reacted positively to the news, with early trading showing gains as investors reassessed the near-term outlook for UK equities. The data bolstered hopes that the Bank of England may pause its tightening cycle sooner than anticipated, though policymakers cautioned against reading too much into a single month’s figures.

Services, which make up around 80% of the economy, expanded by 0.3%, while construction output jumped 1.4% after a weak June. Production remained flat, weighing on overall growth. The unexpected strength follows a period of weak performance earlier in the year, raising questions about the durability of the recovery.

Analysts noted that while the July figure is encouraging, sustained growth will depend on wage trends, consumer confidence, and global demand. The ONS will release revised quarterly GDP estimates later in the month, which could alter the current narrative. For now, the data offers a rare bright spot in an otherwise challenging economic landscape for the UK.