The latest gross domestic product (GDP) statistics revealed that the UK economy grew more strongly than expected in June, although more recent survey data does suggest a renewed contraction looks ‘inevitable.’
Official data released last month by the Office for National Statistics (ONS) showed the economy grew by 0.5% in June. This figure was higher than any forecast submitted to a Reuters poll of economists, with the consensus prediction suggesting the economy would expand by just 0.2% across the month.
ONS said that June’s growth partly stemmed from the increased number of working days with the economy bouncing back from May’s extra Bank Holiday for the King’s Coronation. In addition, the warm weather provided a notable boost to trade in pubs and restaurants as well as activity in the construction sector.
June’s stronger than anticipated figure also resulted in the economy expanding across the second quarter as a whole. The increase of 0.2% between April and June again beat economists’ expectations with the consensus forecast from the Reuters poll pointing to a flat reading.
Data from a closely watched survey released towards the end of last month, however, suggests a third-quarter downturn looks increasingly likely. The preliminary headline reading from the S&P Global/CIPS UK Purchasing Managers’ Index fell from 50.8 in July to 47.9 in August. This represents the weakest recorded figure for two and a half years and took the index below the 50 threshold that denotes a contraction in private sector output.
Commenting on the survey’s findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The fight against inflation is carrying a heavy cost in terms of heightened recession risks. A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector's spring revival.”