Euros boost helped lift UK economy to growth, figures show » InfoUsaPro

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Euros boost helped lift UK economy to growth, figures show

Economists said the threat of a recession was “up in the air” but could be “barely avoided”. Gross domestic product (GDP) rose 0.2% in the June-July period, after falling 0.6% in the previous month when output was hit by the Queen’s Platinum Jubilee Bank Holiday, official data showed.

Services was the main driver of growth, with auto sales and repairs the largest contributor, followed by sports activities and entertainment.

This includes the start of the UK hosting the Women’s European Championships and the Commonwealth Games, the ONS said.

But record heat in July means there will be some lost workdays, particularly in the construction sector, as it is too hot for workers to travel to sites and electricity usage is lower, hitting the production sector.

Growth was below the 0.3% expected by most economists, still putting the economy at risk of a recession.

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Gross domestic product was flat in the three months to July compared with the previous three months.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the threat of a technical recession — defined as two consecutive quarters of falling output — came after the economy contracted by 0.1% between April and June. Now “up in the air”.

But he said the economy had not yet turned around and “we still think a recession will be narrowly avoided in the coming quarters”.

Experts believe the extra public holiday for the Queen’s funeral on September 19 could again weigh on growth this month, with the Pantheon predicting a 0.2% hit to GDP from the lost working days.

Martin Beck, chief economic adviser at EY ITEM Club, said the economy “seems to have little momentum”.

“If GDP were to contract for a second straight quarter in the third quarter, that would be a trigger.

“The energy price guarantee announced last week should significantly reduce the risk of a deep recession, but the next year or so will remain very challenging for the economy.”

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Paul Dales, chief UK economist at Capital Economics, said: “July’s modest rebound in real GDP was disappointing, suggesting that the economy is not gaining momentum and may have slipped into recession.

“The government freeze on utility prices is unlikely to change that.”

David Bharier, head of research at the British Chambers of Commerce, said the figures showed growth “continues to be highly volatile” from month to month.

He added: “The UK economy faces serious near-term and long-term structural issues that could lead to a quarterly recession by the end of 2022 and anemic annual growth thereafter.”

“BCC research shows that business confidence is trending lower, inflation has wiped out turnover and profitability for many companies, and the proportion facing recruitment difficulties is at a record high.

“Last week’s announcement on supporting the corporate energy bill will provide some reassurance to businesses and should dampen one of the main sources of inflation, but more details on the plan are needed to restore confidence in the longer term.”

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Britain’s trade deficit narrowed to £7.8bn in July, better than expected, according to the Office for National Statistics.

But fuel prices are expected to soar to a “huge proportion” later this year as Russia’s war in Ukraine has sent fuel prices soaring.

The UK’s total trade deficit fell in July from £11.4bn in June.

“The trade deficit will be huge in the coming months,” said Gabriella Dickens of Pantheon Macroeconomics.

Ms Dickens predicts the trade deficit will rise to a record 7.5% of GDP in the final three months of 2022, up from 4.7% in the second quarter.

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