Deutsche Bank has raised its near-term UK growth projections after July gross domestic product expanded 0.4 per cent month-on-month, a print that caught forecasters off guard and pushed annualised growth to a 2.4 per cent pace. The revision matters for money markets because it narrows the path for Bank of England rate cuts: stronger output and persistent spending, even as an energy shock squeezes disposable income, make an easing cycle harder to justify.
The July print was broad-based
Services output rose 0.4 per cent month-on-month, production added 0.2 per cent with manufacturing up 0.9 per cent, and construction edged 0.1 per cent higher. Sanjay Raja, the bank’s chief UK economist, described the release as another upside surprise that defied expectations across every major sector.
AI capex is showing up in the services data
The information and services category, telecoms, computer programming and consultancy, and information services, posted the strongest gains. Telecoms rose 1.1 per cent month-on-month, programming and consultancy jumped 3.5 per cent, and information services activities advanced 1.1 per cent. Raja linked the momentum directly to artificial intelligence capital expenditure filtering through the UK’s services engine.
Forecasters face another round of upgrades
Deutsche Bank’s previous call had Q3 GDP expanding 0.1 per cent quarter-on-quarter. The July data now puts the quarter on track for 0.4 per cent growth, four times the earlier estimate. Raja said he expects peers to ratchet up their own projections once the implications settle.
The spending puzzle persists
Households and businesses kept spending in July despite the energy shock hitting real incomes. That resilience, combined with AI-driven investment, suggests the UK growth story is becoming harder to dismiss, even if the composition of the expansion remains heavily tilted toward a single thematic driver.