The UK economy expanded by 0.4% in July, according to the Office for National Statistics (ONS), exceeding economists' forecasts of no growth. This followed a 0.3% increase in June and marked the first growth after a month of zero growth in May. The expansion was primarily driven by the services sector, which saw output rise by 4%, with computer programming contributing the most. Artificial intelligence (AI) and related technologies were noted as significant factors behind the sector's growth over the past three months. The ONS highlighted that administrative services, computer programming, and consulting were key contributors to the growth. Many businesses that reported the highest turnover in July were engaged in AI and cloud computing. Meanwhile, industrial production rose by 0.2% in July, as increases in manufacturing output balanced out declines in mining and electricity and gas supply. This growth in July followed a strong first half of the year, during which the UK recorded the strongest growth among G7 nations, despite the onset of the Iran war. However, economists warned that rising global oil prices—now above $100 a barrel—are likely to drive up inflation worldwide, leading to higher borrowing costs. The UK government’s borrowing costs have reached their highest level in nearly two decades, and economists have cautioned that the chancellor might need to raise taxes or reduce spending in his first budget on 28 October, in response to rising interest rates triggered by market turmoil from the Iran conflict. Some businesses reported that the warm weather and the FIFA World Cup influenced their activity, though the impact varied across industries, benefiting some while challenging others. While the unexpected growth is positive news for Chancellor John Healey ahead of his first budget, experts caution that the long-term economic outlook remains uncertain. Economists believe higher oil prices and strong growth are unlikely to lead the Bank of England to raise interest rates when policymakers meet next week.