Figures from the Office for National Statistics (ONS) showed that services output grew by 0.4% during the month, and was partially offset by a 0.2% fall in production and a 0.1% decline in construction.
The growth seen in June followed flat growth in May, revised down from 0.1%, and an unrevised fall of 0.1% in April.
Resilience during a difficult period
Neil Rudge, chief banking officer at Shawbrook, said the UK economy continued to show “resilience”, despite businesses dealing with a “difficult economic backdrop” such as extreme weather making daily operations harder.
Andrew Phillips, managing director of V12 Retail Finance, said the figures reinforced what was being seen in the retail sector, “consumers remain cautious, but they have not stopped spending altogether”.
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“Growth may have moderated during the second quarter, but the economy continues to expand despite persistent cost pressures and heightened geopolitical uncertainty,” Phillips added.
He added that the resilience seen in the data was “encouraging” but the months ahead would be challenging.
“Higher energy costs and inflationary pressures continue to weigh on household finances, which means flexibility and affordability will remain critical factors in purchasing decisions,” Phillips said.
The mood of the economy replicated in housing
Over the three months to June, GDP grew by 0.4%, slower than the 0.6% growth recorded in the quarter to May.
Richard Pike, chief sales and marketing at Phoebus, said after a strong quarter, it was expected that GDP growth would slow between April and June.
Pike added: “The economy’s had a genuine external shock this year with the continuing conflict in the Middle East. Energy prices are still high and volatile, and the Bank of England expects inflation to rise again later this year.
“That combination of higher costs and higher rates is squeezing business investment and household confidence at the same time, and a small increase in GDP doesn’t undo that backdrop.”
He said this volatility was being seen in the housing market too, saying that after a doubling in net mortgage borrowing in June and property transactions rising after two months of decline, “the underlying momentum is far softer than the headline number suggests”.
Pike added: “For lenders, steady growth and market conditions means managing a genuinely heavy workload – a wave of fixed-rate maturities, borrowers facing real payment shock as they roll onto higher rates, and completions still working through the system on a time lag. However, the rise is clearly good news for the economy and should continue to build market confidence overall”.
