The UK financial system edged again to progress in July with output up by an estimated 0.2 per cent within the month, following a 0.6 per cent fall in June.
It means gross home product, the primary measure of output, stagnated at 0 per cent within the three months to the top of July. Metropolis economists had forecast 0.4 per cent progress over the three months.
Month-to-month GDP is now estimated to be 1.1 per cent above the pre-Covid degree of February 2020.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, stated: “The financial restoration has petered out, however has not gone into reverse but.”
The providers sector grew by 0.4 per cent in July, after a fall of 0.5 per cent in June, and was the primary driver to the rise in GDP. Info and communication grew by 1.5 per cent and was the biggest contributor to the providers progress in July.
Manufacturing fell by 0.3 per cent after a fall of 0.9 per cent in June 2022. This was primarily due to a fall of three.4 per cent in electrical energy, gasoline, steam, and air-con provide.
Development additionally fell in July 2022 by 0.8 per cent, after a fall of 1.4 per cent in June; the lower in month-to-month building output got here solely from a fall within the restore and upkeep work, which declined by 2.6 per cent.
Output in consumer-facing providers grew by 0.6 per cent, following flat progress in June. Client-facing providers remained 4.3 per cent under their pre-coronavirus ranges.
One of many major drivers of low progress over spring was a fall in healthcare exercise pushed by the winding down of the coronavirus Check and Hint programme. Development was additionally dented by the additional financial institution vacation for the Platinum Jubilee celebrations in June.
Financial institution holidays convey a few rise in spending on hospitality and leisure, however it’s usually not sufficient to offset the autumn in output throughout different sectors.
Earlier than the announcement of the federal government’s vitality payments assist package deal on Thursday, the Financial institution of England warned that the UK was heading right into a 15-month recession, which might knock greater than 2 per cent off whole GDP, starting this winter.
Inflation is working at a 40-year excessive of 10.1 per cent, pushed by the hovering value of vitality payments. Policymakers are involved that the autumn in actual incomes, which is the worth of pay packets after adjusting for the influence of inflation, will scale back shopper spending and push the nation into an financial downturn.
Some analysts have stated a recession now seems to be unlikely as a result of the freezing of family vitality payments at £2,500 for 2 years, together with the £400 money cost promised by the previous chancellor, Rishi Sunak, will alleviate the strain on family incomes and go away individuals with more cash to spend.
Nonetheless, the interval of nationwide mourning following the demise of the Queen and the financial institution vacation for her funeral are anticipated to dent output within the third quarter.
Yael Selfin, chief economist at KPMG, stated: “The feeble 0.2% bounce again in July was pushed by weak GDP in June due partly to the lack of working days from the Jubilee lengthy weekend. Extra regarding, July’s GDP stays under the extent seen in Could, pointing to an total contraction over the primary two months of summer season.
“This ties right into a downbeat outlook for the UK financial system which might see one other shallow recession from the top of this yr, pushed by the continuing squeeze on households’ earnings and a rising value burden for companies.
“Whereas almost £170bn price of fiscal measures introduced final week could also be adequate to keep away from a deeper financial stoop, these will likely be partly offset by tighter Financial institution of England financial coverage focussed on combating the excessive ranges of inflation.”