- The Queen’s Jubilee holiday weighed on UK GDP in June
- Production falls 0.6% in June versus forecast for a 1.3% drop
- UK’s Zahawi says data shows resilience, economists see recession
LONDON, Aug 12 (Portal) – The UK economy contracted less than feared in June as the bank holiday was expected to be a major drag, although sectors most exposed to a deepening cost-of-living crisis, such as retail and restaurants , had to fight.
However, overall production for the second quarter still contracted as the UK was expected to enter a long downturn later in the year amid rising inflation and rising interest rates.
The Office for National Statistics said gross domestic product (GDP) fell 0.6% in June, the sharpest fall since January 2021 but less severe than the 1.3% drop forecast by a Portal poll of economists became.
The month unusually included two public holidays to celebrate Queen Elizabeth’s platinum jubilee, but most of the strain on GDP in June came from the winding-down of coronavirus-related health services.
“It’s impossible to say whether this reflects a lighter-than-usual punch from the anniversary or evidence that the economy has considerable underlying momentum,” said Samuel Tombs, economist at consultancy Pantheon Macroeconomics.
Either way, he said, GDP should recover in July.
Friday’s data pointed to growing weakness in consumer-facing sectors of the economy as Britain copes with inflation hitting a 40-year high following the war in Ukraine.
In February 2020, the economy was estimated to be 0.9% above its pre-COVID pandemic level, but production of consumer services was 4.9% below.
Soldiers parade in front of Buckingham Palace during the Platinum Jubilee Pageant, marking the end of celebrations for Britain’s Queen Elizabeth’s Platinum Jubilee in London, Britain, June 5. Frank Augstein/Pool via Portal
Finance Minister Nadhim Zahawi said the numbers indicated “real resilience” in the private sector, but many economists expect a slide into recession.
Last week, the Bank of England forecast the UK would enter recession in late 2022 and out of recession in early 2024 as it hiked interest rates to tackle inflation, which it said was likely to top 13% in October. Continue reading
For the second quarter as a whole, the ONS said the economy contracted 0.1% compared to forecasts for a 0.3% contraction.
The UK has lagged behind the United States, Italy and France in recovering from the COVID-19 pandemic when comparing second quarter economic output to late 2019. However, Germany fared worse.
Economic recovery from the COVID pandemic
“The UK economy is slipping closer to recession and the worst is yet to come,” said Suren Thiru, economics director of the Institute of Chartered Accountants in England and Wales.
Separate ONS data showed Britain’s goods trade deficit swelled to £22.85 billion in June, a three-month high, as exports to the European Union and the rest of the world slowed.
“All in all, trade data is bleak and will continue to deteriorate in the coming months, making sterling even more vulnerable than usual to a reduction in foreign investors’ willingness to provide the finance needed to sustain this excess consumption,” Pantheon’s Tombs said said.
Reporting by Andy Bruce, William James, Farouq Suleiman and Kate Holton; Adaptation by Toby Chopra
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