Economics“Weak recovery”: UK economy grew less than expected in July

“Weak recovery”: UK economy grew less than expected in July

The economic recovery failed to impress economists with warnings that next week’s

The Queen’s funeral could also hit September GDP.
The UK economy grew just 0.2% in July, according to the Office for National Statistics.

The figure was below economists’ expectations of a 0.4% increase and following a 0.6% decline in June.

Despite being 1.1% above pre-coronavirus levels, GDP in the three months to July was flat compared to the previous three months.

The main driver of the July figure was a 0.4% increase in the services sector, which followed a 0.5% decline between May and June.

Yael Selfin, Chief Economist at KPMG UK said: “July’s weak 0.2% rebound was due to weak GDP in June, partly due to lost workdays over the long birthday weekend.

“More worryingly, July GDP remains below May levels, suggesting an overall contraction in the first two months of summer.”

“This relates to the unfavorable outlook for the UK economy, which could see another mild recession later this year, driven by the ongoing decline in household incomes and rising cost burdens on businesses.”
“While the nearly £170 billion worth of fiscal measures announced last week could be enough to avoid a deeper economic downturn, they are partially offset by the Bank of England’s tight monetary policy, which is focused on tackling high inflation rates.”
It comes a month after the Bank of England predicted Britain would fall into a recession later this year that will last until early 2024, largely due to rising costs of living.

Last week Prime Minister Liz Truss announced a massive bailout to help people cope with soaring energy prices, which could slightly reduce inflation but would cost at least £100 billion.

The Queen’s funeral could increase GDP by 0.2% in September

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said July GDP was only 0.04% higher than April, last month unaffected by the Queen’s Jubilee.

The Queen’s funeral could hurt GDP by 0.2% in September, he added.

“Looking ahead, an additional holiday for the Queen’s funeral on September 19 has the potential to inflict more damage to the economy than an extra day of commemoration in June, as the hospitality and tourism sectors are unlikely to benefit, but many businesses will be closed. ”

At the same time, Tombs said he expects real disposable household incomes to recover following the government’s decision to cap energy prices, retain previously announced grants and an expected reversal of April’s Social Security hike.

“The main threat to the economic outlook now is excessive monetary tightening, but we (the Bank of England Monetary Policy Committee) think that will make sense once the slack in the labor market picks up and the pace of gains in core prices picks up. at a slower pace, as the leading indicators show.

Therefore, we continue to believe that a recession will be avoided in the coming quarters.”

PwC says tech recession is expected for the first time since lockdown rules ended

PwC economist Jake Feeney said he expects the UK to enter a technical recession for the first time since lockdown restrictions ended and expects the UK economy to contract in the third quarter of this year after a 0.1% expansion has shrunk.

Referring to July growth, he said: “Looking under the headlines, it is clear that this positive growth rate is mainly due to the performance of the service sector.

“The other two main drivers of economic growth — manufacturing and construction — contracted in July.”

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