Key facts
- The UK economy grew by 0.6% in the first quarter of 2026.
- The services sector was the largest contributor to UK economic growth in Q1 2026.
- UK disposable incomes fell by 0.8% in the first quarter of 2026.
- Rising inflation and higher capital gains tax contributed to the fall in UK disposable incomes.
- This is the fourth decline in UK disposable incomes in five quarters.
- UK shop price inflation remained unchanged in June.
- Slowing food price inflation contributed to stable shop price inflation in June.
- British businesses' confidence in the economic outlook declined in June.
- Canadian economy grew by 0.5% in April.
- This is the largest monthly growth for Canada in nine months.
The UK economy expanded by 0.6% in the first quarter of 2026, a figure confirmed by the Office for National Statistics (ONS) that matched initial estimates. The services sector was identified as the primary driver of this growth. Despite the overall economic expansion, UK households experienced a decline in disposable incomes, which fell by 0.8% during the same quarter. This reduction is attributed to the combined impact of rising inflation and changes to capital gains tax. This marks the fourth decrease in disposable incomes over the past five quarters, indicating a persistent squeeze on household finances.
Further insights into the UK's economic landscape reveal that annual shop price inflation remained stable in June, mirroring the rate observed in May. This stability is largely due to a slowdown in food price inflation. Specifically, fresh food costs decreased, influenced by summer promotions on items like strawberries and ice cream, even as energy prices continued to rise. In contrast, British businesses' confidence in the broader economic outlook saw a decline in June, as indicated by a Lloyds survey. While firms maintained optimism regarding their own trading prospects, the manufacturing sector experienced a notable drop in confidence amidst ongoing cost and economic concerns.
Separately, Canada's economy demonstrated a significant rebound in April, growing by 0.5% on a monthly basis, according to Statistics Canada. This growth rate exceeded expectations and represents the largest monthly increase in nine months. This positive performance followed a contraction of 0.1% in March and has helped to alleviate concerns about a potential economic slowdown driven by tariffs. Analysts predict that while the UK's overall economic growth may stall later in the year, household savings are expected to provide a financial cushion.