Britain’s Economy Shrank in Second Quarter, as Warnings About the Future Get Bleaker
The UK economy contracted slightly in the second quarter, losing momentum as the cost of living crisis deepened and economists predict a recession could begin later this year.
Gross domestic product for April to June fell by 0.1% compared to the previous quarter when the economy grew by 0.8%. National Bureau of Statistics reported on FridayThe biggest drag on growth in the second quarter was a decline in health care services as pandemic measures such as coronavirus testing and vaccination declined. was partially offset by growth in sales and spending related to the Queen’s Platinum Jubilee.
Britons face a bleak combination of stagnating or declining economic growth and one of the highest inflation rates among the rich economies. In June inflation rose to 9.4%, his highest in 40 years, but is not expected to peak until October when he hit 13%. The Bank of England, which has steadily raised interest rates since December to curb a sharp rise in prices, last week predicted the country would enter a prolonged recession at the end of the year that would not end until the beginning of the year. in 2024.
High inflation is putting pressure on household budgets and is expected to lead to a sharp decline in consumer spending, which is usually the main driver of economic growth, but soaring energy prices are also constraining businesses. After adjusting for inflation and taxes, household incomes are projected to fall sharply this year and next, according to the central bank, the worst recorded since the 1960s.
UK households are particularly prepared for precariously high utility bills. When the government price cap resets in October, it will be £3,500 ($4,256) a year, which could triple what he did a year ago. But the effects of high inflation are already being seen. Adjusted for price increases, consumer spending fell 0.2% in the second quarter.
Warnings of low growth and high inflation are ringing around the world. The International Monetary Fund said late last month that the world may soon be “teetering on the brink of a global recession”.
The US economy contracted in the second quarter following a decline in the first quarter, sparking debate as to whether the US is already in recession.
The lingering effects of the pandemic and the economic impact of Russia’s invasion of Ukraine are evident in the UK economy. Declining wholesale and retail business activity held back growth in the second quarter. Businesses report that supply chain disruptions and declining retail sales remain a drag. life.
The National Institute for Economic and Social Research, a London think tank, says the UK economy is already in recessionIt’s a contest that ends next month, highlighting the scale of the challenges candidates face to become the next prime minister. Former Finance Minister Rishi Sunak and Foreign Affairs Minister Liz Truss Clashed over the best approach to reach more householdsthrough tax cuts or direct payments as the UK’s economic outlook becomes more pessimistic.
