The UK’s Covid bounceback has all-but ground to a halt as the economy grew by just 0.1 per cent in July.
Official figures showed that despite restriction easing in England GDP barely expanded amid the ‘Pingdemic’ and supply chain issues.
The level was down from 1 per cent in June and far below the expectations of analysts, who had pencilled in around 0.5 per cent. The economy is still 2.1 per cent below its pre-pandemic high.
Chancellor Rishi Sunak tried to put a brave face on the disappointing data, saying the recovery was ‘well underway’.
ONS Deputy National Statistician for Economic Statistics Jonathan Athow said: ‘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.
‘Oil and gas provided the strongest boost, having partially bounced back after summer maintenance. Car production also continued to recover from recent component shortages.
Official figures showed that GDP barely expanded amid the ‘Pingdemic’ and supply chain issues
‘The service sector saw no growth overall with growth in IT, financial services and outdoor events – which could operate more fully in July – offsetting large falls in retail and law firms.
‘Meanwhile, rising costs and shortages of raw materials pegged back the construction sector again.’
Production output was the main positive contributor, getting 1.2 per cent bigger in July.
But construction contracted for a fourth consecutive month, down by 1.6 per cent on the month.
Mr Sunak said: ‘Our recovery is well underway thanks to the success of the vaccination rollout and the roadmap, with more employees on payrolls that at any point since last March.
‘I am confident that – supported by our Plan for Jobs – we’ll continue to recover from the pandemic, we’ll see more new jobs, and we will Build Back Better.’
The British Chambers of Commerce (BCC) warned yesterday that there is a ‘real danger’ the Government’s health and social care levy could further stifle the economic bounce-back from the pandemic.
The BCC slashed its forecast for third-quarter growth to 2.8 per cent from 3.5 per cent previously as it said the supply chain disruption and hiring difficulties are offsetting the boost from July’s full lifting of coronavirus restrictions.
The supply and lorry driver woes have left supermarket shelves increasingly bare in recent weeks and are hitting sectors from hospitality to housebuilding.
Jonathan Gillham, chief economist at accountancy firm PwC, said: ‘The economy now is being hit by a continued wave of structural problems. Some of these issues will soften over the coming months, but the recovery may well continue to stall if they are not resolved.’
The UK is still set to see the strongest growth since official records began in 1949 as a whole over 2021.
But the rebound is from a low base as the impact of the pandemic was so devastating.
Chancellor Rishi Sunak has been hoping for a strong economic rebound from Covid as he tries to rebuild the public finances
Experts at Capital Economics said there was now a ‘whiff of stagflation in the air’ – where inflation soars but output stagnates. This would stretch household incomes and potentially lead to higher unemployment.
‘It’s becoming clearer that product and labour shortages are acting as a brake on the recovery,’ said Paul Dales, chief UK economist at the consultancy.
‘We believe the bulk of the drag on activity will prove to be temporary but at the moment, it looks as though GDP won’t get back to its February pre-pandemic peak in October as we previously thought.’