LONDON (Oct 15): Britain's economy grew unexpectedly in August, official data showed on Thursday, in a boost to Finance Minister John Healey ahead of the Labour government's budget update this month.

Gross domestic product (GDP) rose 0.1% in August from the previous month, beating analysts' consensus forecast for a 0.1% contraction.

The figure still marked a slowdown from the 0.4% expansion recorded in July.

Prime Minister Andy Burnham, who has made easing the cost of living a key focus for his Labour government, has set the stage for difficult decisions to be made in the Oct 28 budget presentation.

With inflation rising and government bond yields reaching multi-decade highs, Healey, who will unveil the budget, has pledged to maintain strict fiscal discipline.

But he has not been drawn on whether his budget will include new tax rises to help reduce Britain's debt pile.

Analysts expect UK inflation to rise towards the end of the year as higher oil and gas prices feed through to household bills, with little sign of an end to the Middle East war.

"We still expect the coming rise in inflation to dampen growth, but the economy is more robust than we thought," said Paul Dales, the chief UK economist of Capital Economics.

GDP in the three months to the end of August grew 0.7%, the Office for National Statistics (ONS) said.

Liz McKeown, the ONS director of economic statistics, said that "computer programming was once again the largest contributor to growth in the three months to August".

The boom in the artificial intelligence (AI) sector had also helped drive growth in July.

"There is a bit of a divergence going on within the economy, with businesses performing well (partly due to AI-related spending) while households are becoming more circumspect," Dales said.

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