The recent heatwave, the World Cup and tourist holidays have helped UK business activity recover and achieve surprising growth this month.
New initial figures showed activity in the private sector rose in July for the first time in three months.
The UK's S&P Global Composite Purchasing Managers' Index (PMI), which is closely watched by economists, posted a reading of 52.1 in July, up from 49.3 in June.
Any score above the threshold of 50.0 represents growth, and a reading below this indicates decline.
Analysts had forecast a decline for the month, and the data significantly beat estimates for a reading of 49.7.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “UK businesses reported stronger activity in July, pointing to a faster pace of economic growth at the start of the third quarter.
“Hotel businesses saw demand boosted by good weather, the FIFA World Cup and more national holidays, as high costs and uncertainty continued to deter some overseas travel.
“However, overall services growth remained lackluster amid cost-of-living pressures.”
Growth during the month was significantly driven by the UK manufacturing sector, which rose to a reading of 53.6 for the month.
Goods producers saw production levels rise for the fourth consecutive month to push growth to its strongest level in September 2024.
Companies linked the increase to “general improvement” in market conditions and an increase in new orders.
Elsewhere, the influential services sector also returned to growth, hitting a three-month high of 51.8.
Businesses surveyed said they saw stronger demand as the World Cup helped boost activity in the hospitality sector, with fans heading to pubs to watch games.
However, there were still reports that “elevated uncertainty” related to the conflict in the Middle East had impacted some consumer confidence, while parts of the sector were also affected by the hot weather.
The July data also highlighted another moderation in input price inflation, as cost pressures eased in the manufacturing and services sectors.
Thomas Pugh, chief economist at RSM UK, said: “The strong rebound in the flash PMI suggests the economy received a timely boost from World Cup fever, good weather and lower fuel prices in July.
“Combined with rising consumer confidence and higher retail sales, this suggests that households and businesses have coped remarkably well with the first phase of the Iran war.”
