June's GDP number, and what it does to the forecasts
The economy grew when almost nobody expected it to. The interesting part is what that does to a consensus sitting below 1%.
First published in Noise Cancelling
UK GDP grew 0.3% in June. The consensus was for no growth at all, and several forecasters expected a small fall. One month of monthly GDP proves very little on its own, but it arrives with a second quarter of 0.4% and a year-on-year rate of 1.2%, against the 1.1% expected.
That matters more than the month, because of where the forecasts sit. The OECD has 0.9% for 2026. EY has 0.9%, revised up from 0.8% in May. The BCC has 0.9%, KPMG 0.8%. The OBR’s 1.1% in March looked brave at the time. The first half delivered 0.6% and then 0.4% quarter-on-quarter. What’s clear is that there is momentum in the economy. If the momentum continues, we will see much better-than-expected growth for the year. The second half could flatline and deliver just 0.1% per quarter and still beat the consensus.
It might. Those forecasts are not stupid, and they are not stale. They embed an energy shock from the Strait of Hormuz that lands mostly in the second half, and June’s detail was not uniformly good. Industrial production was down; manufacturing production was also down. But the much bigger private consumption (two-thirds of the economy) grew at 0.3%, which was better than expected.
The outcome is consistently better than has been expected. The base going into the second half is better than almost every forecaster assumed, and the UK has spent two years being described as weaker than the data eventually showed.
I set this argument out in July, when the Bank was forecasting 0.1% for the second quarter. The outcome is 0.4%, with the first half landing near 1% against the Bank’s 0.3% forecast (which I said was way too low). The year-on-year number of 1.2% includes Q3 and Q4 from 2025, which were both disappointing (0.1% growth in both quarters).
My point with all of this is not to say “I told you so”, it’s that the official forecasts have been missing the same way all year. You can read my full argument here: Why I can see UK interest rates below 3% next year.
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