The UK economy grew by 0.7% in the third quarter, its fastest expansion in two and a half years, leaving Britain as the second-fastest growing economy in the G7 this year.

The reading defies the forecast that greeted John Healey’s appointment as chancellor in July. According to the Guardian’s account, forecasters were clear at the time that Britain’s resilience to the war in the Middle East would not last — that the global economic headwinds were too strong, inflation was beginning to rise and growth would slow to a trickle. A Treasury memo on Healey’s first day in Downing Street showed the most optimistic City analyst expecting 0.3% growth; most had pencilled in a figure close to zero, and some were warning the UK could edge towards a recession.

Four months into the job, households have continued to spend and business investment has powered ahead, fuelled by the rollout of AI. Household consumption is up 1.6% so far this year, helped by spending over the warm summer months, even as consumers absorbed a squeeze on living standards after the Iran war fuelled a surge in petrol and diesel prices.

Beneath the headline, growth is being driven by IT and professional services — the central sectors of the AI boom — which together contributed about half of the rise in activity. Analysts at ING suggested the strength in IT was “very clearly a datacentre story”, thanks to the UK’s status as a leading destination in Europe for investment.

Deutsche Bank estimates AI-related spending has added about 0.3% to 0.4% to GDP growth this year. The Guardian notes Healey is keen to build on groundwork laid by his predecessor, Rachel Reeves, to harness AI amid government efforts to court global business investment.

Both of Britain’s recent growth engines now face a tougher period ahead, according to the Guardian’s analysis, and the fear is that the UK’s initial resilience to the economic storm emanating from the Middle East will soon fizzle out.

The outlook for the AI investment boom is less certain after the US midterm elections and revelations at Nvidia. Financial markets have been rocked in recent weeks by fears that a bubble in AI stocks could be about to burst, and a slowdown in technology investment could hit the UK — though the hope, the analysis notes, is that swelling demand for AI will not evaporate overnight.

For households, a tough winter lies ahead. Energy bills are poised to increase by about a quarter in January, with the average annual household gas and electricity bill set to climb to more than £2,000. Analysts say it is hard to see how consumer spending would avoid coming under greater pressure in the new year.

The latest data already carry early warning signs: retail sales and consumer discretionary spending fell in September. Real wage growth is cooling, and headline inflation is on track to reach a fresh peak of close to 5% next year.

With growth proving resilient, the Guardian’s analysis suggests the Bank of England will feel emboldened to raise interest rates to combat imported inflation. City investors expect at least two more quarter-point increases, to 4.5%, before the end of next year — moves that would slow the economy and add to the cost of living squeeze.

At last month’s budget, Healey struck a defiant tone, arguing that the UK could continue to defy forecasters’ expectations. The Guardian’s assessment is that the task is becoming increasingly tough.