LONDON– The UK economy contracted in the three months to June, figures released on Friday showed – a smaller-than-expected contraction that nonetheless added to jitters about the rocky months ahead.
The Office for National Statistics said Britain’s gross domestic product fell 0.1% between April and June, compared with growth of 0.8% in the previous quarter. GDP contracted by 0.6% in June and May growth estimates were revised down to 0.4% from 0.5%.
The statistics office said healthcare spending was the largest contributor to the decline as the government scaled back coronavirus testing, contact tracing and vaccination programs.
“Many retailers also had a difficult quarter,” said Darren Morgan, director of economic statistics at ONS. “These were partially offset by growth in hotels, bars, hairdressers and outdoor events throughout the quarter,” partly as a result of Queen Elizabeth II’s Platinum Jubilee celebrations in June.
Analysts said the decline doesn’t necessarily mean the start of a recession, which is often defined as two quarters of economic contraction. However, the Bank of England says Britain is likely to fall into recession later this year as a cost of living crisis worsens and inflation rises above the current 9.4%.
The average fuel bill for UK households has risen by more than 50% this year as the war in Ukraine depresses world oil and natural gas supplies, and a further increase is due in October, when the average bill is expected to hit £3,500 (US$4,300). -dollars) per year will reach .
“The decline in UK GDP in the second quarter was largely due to noise,” said James Smith, developed markets economist at ING Economics. “But the risk of a recession is rising fast as gas futures hit new highs for next winter and our latest estimates suggest the household energy price ceiling could hit nearly £5,000 in the second quarter of next year. A lot now depends on the fiscal policy announcements in the autumn.”
Anti-poverty campaigners, consumer groups and opposition politicians are urging Prime Minister Boris Johnson’s Conservative government to help people cope with the rising bills. But Johnson is in his final weeks as prime minister and says “significant budgetary decisions” must be left to his successor, who will take office in September.
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