UK economy stalls

The UK economy stagnated in the three months to July as the cost of living crisis hit households and businesses. Output was flat, according to official data released yesterday, compared with economic growth of 0.3 per cent in the three months to April. The latest data will soon be superseded by figures that are likely to show a relative decline in UK economic performance compared with other leading economies such as Germany. In yesterday’s data from the Office for National Statistics, the growth rate lost momentum as rising costs hit consumers and businesses.

Inflation hit a 40-year high of 10.1 per cent in July, eroding the money people have available to spend on goods and services. The size of the economy in July was no higher than six months earlier and the monthly rise in gross domestic product of 0.2 per cent fell short of the 0.4 per cent forecast by economists polled by Reuters. Economists had expected more of a bounce back from the 0.6 per cent fall in GDP recorded in June, which reflected the loss of two working days linked to the Queen’s platinum jubilee celebrations. «The disappointingly small rebound in real GDP in July suggests that the economy has little momentum and is probably already in recession,» said Paul Dales, economist at Capital Economics.

The GDP data showed services expanding 0.4 per cent but production, including manufacturing, falling 0.3 per cent, after a decrease of 0.9 per cent the previous month. The ONS has published new estimates for GDP up to the end of 2020 that show the level of UK output 2.5 per cent lower at the end of the period than the current set of figures.

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