A review of figures showed the economy shrank by 0.5 per cent in July, increasing the chance of recession going into a general election year. The increase of GDP of 0.5 per cent in the month of June was reversed by the month-on-month fall of 0.5 per cent in July which was the biggest decline since December, with retreat in production, construction and services sectors.
Government Minister, Maria Caulfield conceded that the contraction was “disappointing” but said that the pivotal services sector was affected by strikes by teachers and doctors, and by poor weather conditions in July.
After speculation that the government would backslide on boosting pensions next year given high rates of inflation and earnings, Caulfield also insisted that the triple lock on pensions was “absolutely” safe under the Conservatives for this year and 2024.
Finance Minister (chancellor) Jeremy Hunt said: “Only by halving inflation can we deliver the sustainable growth and pay rises that the country needs.” He added: “But there are many reasons to be confident about the future”, following revisions to past GDP data that showed the economy came out from the pandemic in a much better state than previously expected.
GDP increased by 0.2 per cent in the three months to July, according to the Office for National Statistics (ONS). Opposition politicians, however, were critical about the economic management of Rishi Sunak’s government with all main parties getting organised for their annual conferences.
Labour Party’s shadow chancellor, Rachel Reeves, said: “This is another dismal day for growth, and the British economy remains hostage to the Conservatives’ low growth trap that is leaving the working people worse off.” She added: “After 13 years of instability, the Conservatives have left the British economy weaker and families having to cope with higher taxes, higher mortgages and higher food and energy bills”.
Any slowdown could, however, help the Prime Minister’s pre-election drive to curb high inflation. Some analysts said that Britain could already be in recession. Chief UK economist at Capital Economics, Paul Dales, noted the July fall was more than double than expected on the markets, and “could possibly mean that the mild recession we have been expecting has begun.”
He added: “Even so, with wage growth still uncomfortably strong, we suspect the Bank of England will still raise interest rates one final time next week, from 5.25 per cent to 5.50 per cent.” European strategist at Raymond James Investment Services, Jeremy Barstone-Carr, said: “The GDP drop of 0.5 per cent provides further evidence that the UK economy’s resilience is starting to wane and suggests a shallow recession is increasingly likely over the remainder of the year.”
The ONS said the sector for human health and social work activities recorded a 2.1 per cent decline in July owing to industrial action by NHS senior doctors and radiographers, coupled with more strikes by junior doctors.
The education sector also recorded a 1.1 per cent fall with teachers staging two days of strikes. Torrential rain also ravaged the retail sector where output was down 1.2 per cent as shoppers avoided the High Street. However, this was partially offset by the sports activities and amusement and recreation activities sector, which surged 12.4 per cent in the month.
Analysts said the much hyped shared release of the Barbie and Oppenheimer films on 21 July in a week of heavy rain was a welcome boost to the economy. The UK box office took £160 million in July up 78 per cen ton June and 27 per centc ahead of July 2022.
Just two weeks after release Barbie had brought in £59.6 million. Oppenheimer took £33.7 million. The Odeon cinema chain reported more than one million movie fans paid to see the two releases in just four days making it the biggest weekend since reopening after the pandemic.
andyjalil@aol.com
The writer is our foreign correspondent based in the UK
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