We will avoid a crash, analysts say as GDP falls
The economy contracted in July, as this week’s figures are likely to show, but city experts remain confident that a slump will be avoided.
Analysts estimate that a combination of wet weather that hit retail sales and public sector strikes affected output, which is estimated to have contracted as much as 0.4 percent for the month.
This follows growth of 0.5 per cent in June, although it was flattered compared to May, when there was an additional bank holiday.
Maintaining control of the pocketbook: Analysts see a combination of wet weather affecting retail sales and public sector strikes affecting production.
Samuel Tombs, chief economist at Pantheon Economics in the UK, said that while growth was “slow”, the economy was not yet “falling into recession”.
“It should be clear from the breakdown of the July GDP figures that the decline reflects one-off setbacks rather than a broad-based slowdown.” The rain may even have boosted demand elsewhere, Tombs added, pointing to the increase in box office receipts for blockbuster movies Barbie and Oppenheimer.
Investment bank Investec expects a 0.4 percent drop for July, while Pantheon Economics predicts a 0.2 percent drop.
The weakening economy may also encourage the Bank of England to pause its series of interest rate increases. Gov. Andrew Bailey said last week that he believed the base rate – now 5.25 percent – was approaching the “top of the cycle.”
He expects inflation, which currently stands at 6.8 percent, to fall “noticeably” by the end of the year.
The Office for National Statistics will report its latest GDP estimates on Wednesday. Any assessment of the economy will be complicated by its recent major revisions to GDP performance for 2020 and 2021.