Finance

UK economic recovery slows as consumers rein in spending

UK GDP updates

The UK economic rebound slowed to a crawl in July as consumers spent less in stores and a shortage of raw materials hit the construction sector.

Output rose 0.1 per cent in July compared with the previous month, the Office for National Statistics said on Friday, which is slower than the 1 per cent expansion in June and lower than the 0.6 per cent expansion forecast by economists polled by Reuters. The economy was still about 2.1 per cent smaller than in February 2020, before the first coronavirus restrictions.

“The recovery is now entering a tougher phase,” said Andrew Goodwin, chief UK economist at Oxford economics, with many risks remaining in the coming months, including the scaling back of government support, and shortages of components and labour that represent a growing constraint on activity.

“After many months during which the economy grew strongly, making up much of the lost ground from the pandemic, there was little growth overall in July,” added Jonathan Athow, ONS’s deputy national statistician for economic statistics.

The services sector had no growth overall, he said, with rises in IT, financial services and outdoor events, which could operate more fully in July, offsetting large falls in retail and legal services.

Services output remained broadly flat in July even as arts, entertainment and recreation activities grew 9 per cent, boosted by sports clubs, amusement parks and festivals, reflecting the easing of restrictions on social distancing from July 19.

Output in consumer-facing services fell 0.3 per cent in July, its first decline since January, mainly because of a 2.5 per cent drop in retail sales.

Construction contracted for a fourth consecutive month, with output down by 1.6 per cent.

Production output increased 1.2 per cent in July and was the main contributor to growth in gross domestic product, boosted by the reopening of an oilfield production site, which had been closed for maintenance.

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