The UK economy saw growth of 0.2% in July, following a sharp fall of 0.6% in the previous month, according to the Office for National Statistics (ONS)
The UK economy grew slower than expected in July as worker shortages and inflation weighed heavily on activity amid the growing risk of recession.
According to the ONS, gross domestic product (GDP) rose by 0.2% in July, after a sharp fall of 0.6% in June 2022. Though 1.1% above pre-coronavirus levels, GDP was flat in the three months to July compared with the previous three months.
The services sector was the biggest contributor to growth, seeing a rise of 0.4%, following a 0.5% drop between May and June.
Yael Selfin, chief economist at KPMG UK, said: ‘The feeble 0.2% bounce back in July was driven by weak GDP in June due in part to the loss of working days from the Jubilee long weekend.
‘More concerning, July’s GDP remains below the level seen in May, pointing to an overall contraction over the first two months of summer.
‘This ties into a downbeat outlook for the UK economy which could see another shallow recession from the end of this year, driven by the ongoing squeeze on households’ income and a rising cost burden for businesses
‘While nearly £170bn worth of fiscal measures announced last week may be sufficient to avoid a deeper economic slump, these will be partly offset by tighter Bank of England monetary policy focused on combating the high levels of inflation.’
The figures come amid growing concerns over Britain’s economy as soaring inflation and rising costs weigh heavily on households and businesses. The Bank of England warned that the UK will likely fall into recession at the end of the year, which could last until early 2024.
The information and communication sector grew by 1.5%, the largest contributor to services growth in July. The main driver was computer programming, consultancy, and telecommunications.
Production fell by 0.3% after a fall of 0.9% in June, mainly because of a drop of 3.4% in electricity, gas, steam, and air conditioning supply.
Jake Finney, economist at PwC, said: ‘Looking beneath the headlines, it’s clear this positive growth rate was primarily led by the performance of the services sector. Two of the other main engines of economic growth – production and construction – contracted in July.
‘Despite today’s positive growth figures, our expectation is that the UK economy will contract in the third quarter of 2022, following its 0.1% contraction in the second quarter. This would mean that the UK enters a technical recession for the first time since lockdown restrictions ended.’
