UK household income grew at a stronger pace than previously estimated during the first six months of the year, according to revisions of official data.
The rise in income per head to 1.1% between January and June followed an increase in the level of economic growth that illustrated the resilience of the UK economy since the outbreak of hostilities in the Middle East more than seven months ago.
The Office for National Statistics (ONS) said gross domestic product (GDP) increased by 0.5% rather than the previously estimated 0.4% in the April to June quarter, showing that the UK economy grew at the same pace as the US in the first six months of the year. The economy grew 0.6% in the first quarter.
Analysts said a “Burnham bounce” in confidence could have been a factor, as the Makerfield byelection announced in May paved the way for the former mayor of Manchester to become prime minister.
The ONS said households were also able to put some of the rise in incomes into savings accounts. The savings rate increased from 8.6% in the first three months to 8.8% in the three months to the end of June.
Thomas Watts, a fund manager at the private bank Julius Baer, said the figures were “yet more positive news for the new administration” after previous data had shown the resilience of the UK economy since the start of the US-Israel war on Iran in February.
The upgrade is a boost for the chancellor, John Healey, as he prepares to give his first budget next month.
The sharp increase in GDP per head in the first half of the year put the UK near the top of the G7 leader board, ahead of Germany, France and the US and just behind Canada, which topped the poll with a growth rate of 1.3% in the first and second quarters.
Businesses also kept spending, especially on investment. The ONS said business investment increased by 1.8% in the second quarter and was estimated to be 5.2% higher compared with the same quarter a year ago.
Kathleen Brooks, the research director at XTB, said the markets were in an “upbeat mood” after the revisions, which “suggest that the UK economy was resilient to the effects of the Iran war, the energy price surge and the rise in borrowing costs”.
She said: “Stronger services growth and rising household spending boosted the figure. This is fairly typical of the UK economy, which is service based; the real surprise was the strength of business investment and an improvement in the trade figures, which showed a boost in exports.”
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Currency markets reacted positively to the figures. Traders speculated that the UK’s strong growth rate may persuade the Bank of England that the economy is “running hot” and needs higher interest rates to calm it down, especially when inflation at 3.1% is above the central bank’s 2% target.
Sterling hit a six-week high against the euro and edged higher against the US dollar, up 0.4% to a one-week high of $1.3292. Against the euro, sterling was at its highest since mid-August, with the euro down nearly 0.3% at 85.43p.
UK government bond yields, which provide a measure of the interest rate paid on UK debt, eased on the stronger economic data and lower global oil prices.
Two-year UK bond yields were down 0.05 of a percentage point at 4.86%, while 10-year UK bond yields were four basis points lower at 5.356% on Wednesday.
Oil and gas prices have surged since the conflict first started. After a ceasefire in the summer, traders have lost confidence in efforts to secure a peace deal and sent Brent crude prices back above $100 a barrel, though they have eased in recent days.