Figures may be ‘bumpy for a while longer’
UK GDP growth fell to just 0.1% in July, well below City expectations, according to official data, raising question marks over the possibility of the UK economy going into reverse.
The slowdown marks the end of a strong period of growth that started at the beginning of the year.
Factors including the easing of restrictions, pent-up demand and the furlough scheme helped to prop up the economy earlier this year.
However, global supply chain issues and labour shortages have led to the outlook worsening.
The furlough scheme will come to an end this month with 1.6m people still relying on government support.
This is creating fears over a potential rise in unemployment, while ongoing supply chain issues could take some time to be resolved as well.
Paul Craig, portfolio manager at Quilter Investors, commented on the data: “Given July’s stat includes ‘freedom day’, a 0.1% GDP growth figure for July is fairly disappointing. Leisure and entertainment saw good growth, reflecting the easing of restrictions, but this was not enough to offset falls within construction and retail.”
“It was hoped household consumption would help drive the economic recovery, but given concerns around Covid cases and the pingdemic that caused many to self-isolate, it shows the economy cannot solely rely on consumers and instead needs other areas of the economy to start delivering once more.”
“The UK economy is showing some sign of strain with the shortage in HGV drivers and supply chain issues. This is going to take some time to resolve itself, so the figures may be a bit bumpy for a while longer. Inflation remains a concern and this could be enough to spook Andrew Bailey and the MPC into not joining the ECB and withholding its tapering plans,” Craig said.