Figures released on Friday showed the UK’s economy contracted in the three months to June – a smaller-than-expected contraction that nevertheless added to worries about tough months ahead. next.
The Office for National Statistics said Britain’s gross domestic product shrank 0.1 per cent between April and June, down from a 0.8 per cent increase in the previous quarter. GDP fell 0.6% in June and growth estimates for May were revised down from 0.5% to 0.4%.
The statistics office said health spending was the biggest contributing factor to this drop, as the government scaled back its coronavirus testing, contact tracing and vaccination programs.
“Many retailers also had a rough quarter,” said ONS chief economic statistics officer Darren Morgan. “These were partially offset by growth in hotels, bars, hair salons and outdoor events during the quarter,” in part as a result of Queen Elizabeth II’s Platinum Year celebrations in June.
The downturn doesn’t necessarily mean the start of a recession, which is usually defined as two-quarters of an economic contraction, analysts said. However, the Bank of England said the UK is likely to slip into a recession later this year as the cost of living crisis worsens and inflation rises above the current 9.4%.
The UK’s average household fuel bill has increased by more than 50% this year as the war in Ukraine choked off global oil and natural gas supplies, and another increase was in October, when the average bill is forecast to reach £3,500 ($4,300) a year. .
“The drop in UK GDP in the second quarter was mainly due to noise,” said James Smith, chief market economist at ING Economics. “However, the risk of a recession is rapidly increasing, with gas futures prices hitting new highs for next winter and our latest estimates suggesting that the household energy price cap could be closer to £5,000 in the second quarter of next year. Much now depends on the autumn fiscal policy announcements.”
Anti-poverty campaigners, consumer groups and opposition politicians are pressing Prime Minister Boris Johnson’s Conservative government to help people cope with soaring bills. But Johnson is in his final weeks as prime minister and says “important financial decisions” must be left to his successor, who will take office in September.
