UK economy grows 0.5% in second quarter, beating forecasts

Exports jumped 2.8% and business investment rose 5.2% on the year, while government spending and imports lagged expectations.

UK gross domestic product rose 0.5% quarter-over-quarter in the second quarter, ahead of the 0.4% forecast, and climbed 1.4% year-over-year against an expected 1.2%.

Exports grew 2.8% on the quarter, far above the 0.5% forecast, while imports were flat at 0.0% against an expected 0.5% rise. The current account deficit narrowed to £19.9 billion, from £22.1 billion previously, and smaller than the £25.5 billion gap expected.

Business investment rose 1.8% on the quarter, above the 1.7% forecast, and was up 5.2% year-over-year against an expected 0.8%. Private consumption matched forecasts at 0.3%. Government spending fell 0.5% on the quarter, a steeper drop than the 0.3% expected, and gross fixed capital formation rose 0.9%, below the 1.2% forecast.

The strength in exports and business investment adds to the case for the Bank of England's hawkish stance, already reflected in gilt yields at multi-decade highs and traders pricing four to five rate hikes through 2027. That dynamic runs through sterling and UK interest rates rather than US risk appetite. With the Bank of England projected to hold rates through the second quarter of 2027 by its own median forecasts, the stronger growth print is unlikely to shift Fed policy expectations or US earnings assumptions, leaving the setup for the S&P 500 ETF SPY unchanged.