The UK’s GDP fell by 0.6% in June, new data published by the Office for National Statistics (ONS) has revealed.

This followed 0.4% growth in May, which the ONS has revised down from 0.5%, although GDP was still up by 1.9% in the 12 months to June.

The ONS noted that the Platinum Jubilee, and the move of the May bank holiday, led to an additional working day in May and two fewer working days in June, which should be considered when interpreting the seasonally adjusted movements involving May and June this year.

All main sectors contributed negatively to the ONS’s monthly GDP estimate in June, with the services sector the main contributor, falling by 0.5%. Production and construction also fell in June, with declines of 0.9% and 1.4%, respectively.

Monthly GDP is now estimated to be 0.9% above its pre-pandemic level from February 2020, the ONS added.

Commenting on the figures, personal finance specialist at Nutmeg, Annabelle Williams, said: “Today’s GDP growth estimates are a stark reminder of how important the financial wellbeing of households is to our economy.  
 
“Consumer spending has been limited by the range of cost pressures affecting households up and down the country. As inflation has risen to a 40-year high and is forecast to surpass 13% in October, there’s nowhere to hide for households whose incomes have not risen to keep pace with rising prices.  
 
“Amid the smorgasbord of concerns for consumers and businesses, it's possible that fear there may be worse to come has encouraged some consumers and businesses to hold back from spending, an understandable reaction but one that has the potential to bring forward the likelihood of slower economic growth or even stagnation.  
 
“If there’s any economic lesson to be learned from the past two years, it’s to expect the unexpected.”

Head of investment research at Wealth Club, Jonathan Moyes, added: “Attention will now no doubt turn to the Bank of England. The current inflationary spike is being driven overwhelmingly by global food and energy prices which, by and large, are outside of the Bank’s control. Higher interest rates in the UK will do little to alleviate those pressures.

“By looking to stave off any knock-on inflationary pressures, such as higher wages, the Bank risks strangling the life out of the economy without significantly easing the cost-of-living crisis. Whilst the Bank expected a slight contraction in Q2 GDP, the mounting weakness in the UK economy may give it pause for thought before continuing to lift rates higher.”

Share Story: