UK economy grows more slowly than expected

Wednesday 14th September 2022 06:45 EDT

The UK economy grew more slowly than expected in July as worker shortages and soaring costs weighed on activity amid the heightened risk of recession. The Office for National Statistics said gross domestic product (GDP) rose by 0.2% in July, after a sharp fall of 0.6% in June when the additional bank holiday for the Queen’s platinum jubilee led to a decline in activity.

City economists had forecast a stronger 0.4% recovery after the fall a month earlier. Reflecting weakness in the economy, GDP growth was flat over the three months to July, with a slump in the UK’s dominant service sector offset by stronger activity in industrial production and construction.

Yael Selfin, the chief economist at KPMG UK, said the “feeble” growth rate in July suggested the economy remained smaller than in May, reflecting a weak summer amid growing concerns over the cost of living.

“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,” she said.

The figures come amid growing concern over the strength of Britain’s economy as soaring living costs weigh on households’ spending power. The Bank of England has warned high inflation fuelled by rising energy bills will probably plunge the economy into a lengthy recession this winter.

In her first week as prime minister, Liz Truss announced plans to freeze household energy bills and provide support for businesses in a package of measures to soften the blow from rising prices worth more than £150bn. Economists expect the support will probably prevent a higher peak for inflation and reduce the severity of the looming recession.

It comes as businesses curtail events during the national mourning period after the death of Queen Elizabeth II last week, while the Bank has pushed back a decision on raising interest rates to 22 September, in a mark of respect. Faced with soaring inflation, the central bank is expected to raise borrowing costs by at least 0.5 percentage points from the current rate of 1.75%, despite the mounting risks to growth.

comments powered by Disqus

to the free, weekly Asian Voice email newsletter