People walk across London Bridge during morning rush hour, in London, Britain, June 11, 2021. REUTERS/Henry Nicholls

‘Weak rebound’: UK economy grew less than expected in July

Britain’s economy grew by just 0.2% in July, according to the Office for National Statistics.

The figure was below the 0.4% growth expected by economists, and follows a 0.6% drop in June.

Although that means it is 1.1% above pre-coronavirus levels, GDP was flat in the three months to July compared to the previous three months.

The main driver of the July figure was the 0.4% growth seen in the services sector, after a 0.5% decline between May and June.

Yael Selfin, chief economist at KPMG UK, said: “The weak rebound of 0.2% in July was due to the weakness in GDP in June, partly due to the loss of working days from the long weekend of the Jubilee.

“More worryingly, July GDP remains below the level seen in May, indicating an overall contraction in the first two months of the summer.

“This is linked to a pessimistic outlook for the UK economy which could experience another shallow recession from the end of this year, driven by continued pressure on household incomes and rising costs for businesses.

“While nearly £170bn of fiscal measures announced last week could be enough to stave off a deeper economic collapse, these will be partly offset by tighter monetary policy from the Bank of England focused on tackling against high levels of inflation.”

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It comes a month after the Bank of England forecast that the UK would slip into a recession at the end of this year, which would last until early 2024mainly due to the increasing cost of living.

Last week, Premier Liz Truss announced a massive aid to help people cope with rapidly rising energy priceswhich might ease inflation slightly, but will have an estimated cost of at least £100 billion.

Queen’s funeral could lead to 0.2% increase in September GDP

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

The Queen’s funeral could result in a 0.2% fall in September GDP, he added.

“Looking ahead, the extra bank holiday for the Queen’s funeral on September 19 has the potential to be more damaging to the economy than the extra Jubilee day off in June, as the hospitality sector and tourism probably won’t benefit, but many businesses will close anyway.”

At the same time, Mr Tombs said he expected real household disposable income to pick up following the government’s decision to cap energy prices, retain previously announced subsidies and the expected reversal of the National Insurance hike in April.

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“The main threat to the economic outlook now comes from excessive monetary policy tightening, but we think the (Bank of England’s monetary policy committee) will soon see its meaning, as the labor market slowdown is accumulating and the pace of rising core prices is slowing, as leading indicators suggest.

“As a result, we continue to believe that a recession will be narrowly avoided in the coming quarters.”

PwC announces expected technical recession for first time since end of foreclosure rules

PwC economist Jake Finney said he expected the UK to enter a technical recession for the first time since lockdown restrictions ended, predicting the UK economy would contract in the third quarter of this year, after contracting 0.1% in the second quarter.

Regarding July growth, he said: “Looking under the headlines, it is clear that this positive growth rate was mainly driven by the performance of the services sector.

“Two of the other main drivers of economic growth – production and construction – contracted in July.”

‘Weak rebound’: UK economy grew less than expected in July

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