Closing summary: The prelude to recession
Is the UK economy in recession? It depends who you ask.
UK GDP contracted by 0.2% in the second quarter. A second consecutive quarter would mean the UK is in a technical recession.
The data on Friday were only “a prelude to recession”, according to economists led by Holger Schmieding at Berenberg, an investment bank.
The recession is likely to last until the first quarter next year, with a peak-to-trough decline in real GDP of 2.3%. The annual growth rate for 2022 would then be 3.0%– which looks high but is driven by the 2.8 percentage point statistical overhang from 2021 with its post-COVID-19 bounce-back. In 2023, we expect GDP to decline by 1.2%, before growth recovers to 1.7% in 2024.
In fact, it is a bit of a puzzle that the drop has not been more pronounced. June’s 0.6% month-on-month GDP decline was comparatively modest versus drops of 1.7% and 2.2% in the jubilee celebrations of June 2012 and 2002, according to Oxford Economics, a consultancy.
Andrew Goodwin, Oxford Economics’ chief UK economist, said this might be explained by “structural changes to the economy, including the rise of online shopping” which allow people to keep on working.
Other options for why it wasn’t as bad a contraction as expected might include stronger-than-thought underlying economic momentum, or that it will be revised down at the next estimate, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
June’s 0.6% m/m drop in UK GDP is puzzlingly small, given that it fell by 2.2% in June 2002 & 1.7% in June 2012. There are only 3 possible explanations:
— Samuel Tombs (@samueltombs) August 12, 2022
1. Fall will be revised larger in time
2. Econ is more adaptable now
3. Jubilee hit still big but econ has strong momentum
National Institute of Economic and Social Research (Niesr) runs a “nowcast” for the UK economy using more timely data. For the third quarter (i.e., now), it predicts a contraction of 0.1%, with growth “likely to slow further as inflation drags on consumer demand”.
Stephen Millard, deputy director for macroeconomic modelling and forecasting, at Niesr.
It now looks like the UK economy entered a recession in the second quarter of this year as GDP fell by 0.1%, and we expect output to continue falling over the next three quarters.
On the expenditure side, the fall in Q2 was driven by a 0.2% fall in consumption; on the output side, by a 0.4% fall in services, particularly, health and social work. GDP fell by 0.6% in June after a revised rise of 0.4% in May as the platinum jubilee celebrations affected the monthly profiles.
That’s all from us this week, but you can continue to read our live coverage from around the world:
In the UK, Boris Johnson admits government’s cost of living support is not enough
In our coverage of Russia’s invasion of Ukraine, President Volodymyr Zelenskiy tells officials to stop leaking military tactics; UN sounds nuclear plant warning
And in the US, the FBI search of Donald Trump’s property overshadows Congress as it convenes to pass climate bill
Thank you as ever for following our live coverage of business, economics and financial markets. Do join us bright and early on Monday morning for more of the same. JJ
BT has responded to the union announcement of further strike action by thousands of workers.
The company said that it will not return to the negotiating table having made a pay award in April - amounting to 5% on average and 8% for the lowest paid workers - which it says is the highest award in 20 years.
A spokesman for BT said:
We have made the best pay award we could and we are in constant discussions with the CWU to find a way forward from here.
We will work to reduce the impact of any industrial action by, for example, postponing any non-essential planned engineering or software updates - similar to what we did at the height of the pandemic and as we do over holidays like Christmas.
Updated
Shares on Wall Street have gained ground as trading opens in the final session of the week.
Here are the opening news snaps, via Reuters:
S&P 500 UP 20.29 POINTS, OR 0.48%, AT 4,227.56 AFTER MARKET OPEN
NASDAQ UP 80.23 POINTS, OR 0.63%, AT 12,860.14 AFTER MARKET OPEN
DOW JONES UP 121.01 POINTS, OR 0.36%, AT 33,457.68 AFTER MARKET OPEN
It has followed European stock markets in a gentle gain for the day, without much in the way of catalysts for a bigger move on a fairly quiet August Friday.
The FTSE 100 is up by 0.35%, Germany’s Dax is up by 0.6%, France’s Cac 40 has gained 0.2%. All in all, there’s a distinct feeling that traders have their feet up on the beach.
BT staff are to go on strike on the 30th and 31st August in a second round of nationwide action at the telecoms company in a dispute over pay as the cost of living soars.
The two 24-hour strikes by BT engineers and call centre staff belonging to the Communications Workers Union (CWU) represents the majority of the company’s 58,000-strong frontline workforce.
The CWU has warned that customers can expect disruption to services including repairs, having new phone and internet lines fitted or getting hold of contact and support staff.
It is the second round of strikes by workers who took action on 29 July and 1 August, the first national action at the UK’s largest telecoms company since 1987. BT has been in dispute with CWU, which represents about 40,000 of the firm’s 100,000 workforce, which is seeking a 10% pay rise with inflation running at a 40-year high.
The union represents about 9,000 call centre workers and more than 28,000 engineers at the BT-owned Openreach, which maintains the UK’s broadband network.
Andy Kerr, the deputy general secretary of the CWU, said:
Our BT and Openreach members responded magnificently to the first strike call in July and we’re confident they will be every bit as rock-solid in this second bout of action too.
We remain, as ever, open to negotiations, but in the meantime we are organising and preparing to deploy our pickets all around the UK.”
BT workers to strike on 30 and 31 August
BT and Openreach workers will go on strike for two more days on 30 and 31 August, according to the Communications Workers Union.
The workers at the start of this month staged their first national strikes in 35 years over pay.
In April, BT gave 58,000 workers a £1,500 pay rise that it said was its biggest award in two decades. The CWU, which is pushing for a 10% rise at BT as inflation reached a 40-year high of 9.1% last month, described the offer as “insulting” and a “relative pay cut”.
We have today served notice on BT Group and Openreach for further strike action on Tuesday 30th and Wednesday 31st August #FoodBankPhil pic.twitter.com/6Fpvj1Yunv
— The CWU (@CWUnews) August 12, 2022
Johnson & Johnson is to stop selling and making talc-based baby powder globally, two years after it ended sales in the US and Canada, the Guardian’s Mark Sweney reports.
The healthcare firm has faced tens of thousands of lawsuits from consumers who allege its talc products, including the instantly recognisable brand of Johnson’s baby powder, caused them to develop cancer.
“As part of a worldwide portfolio assessment, we have made the commercial decision to transition to an all cornstarch-based baby powder portfolio,” the company said in a statement. “As a result of this transition, talc-based Johnson’s baby powder will be discontinued globally in 2023.”
In 2020, the company announced it was to stop selling the talc-based version in North America because of a fall in demand after what it said was “misinformation” about the product’s safety and legal challenges.
You can read the full report here:
The company has always insisted there was no link between cancers and the product, but it has faced significant pressure to stop selling the product.
Antoine Argouges, chief executive of Tulipshare, a shareholder activist platform that had targeted the company on the issue, said:
We are delighted that Johnson & Johnson have put people above profit today and has listened to calls to end the sale of its cancerous product. J&J continued for decades to use talc in its Baby Powder even though its own scientists warned it contained traces of asbestos. Rather than using cornstartch, as its scientists recommended, it opted for talc because it was cheaper.
Today is a triumph in corporate governance and for the investors, consumers, and campaigners who all united under the umbrella of shareholder activism to make this happen. When individuals unite their collective action really can overcome the power of companies.
An interesting note from Ireland’s Central Statistics Office: Irish house prices have finally reached the levels of the frenzy that preceded the global financial crisis in 2007.
Ireland’s national residential property price index (RPPI) reached 163.6 points for June 2022, “equal to its highest level recorded at the peak of the economic boom, in April 2007”, the agency said.
Prices plummeted once the extent of the eurozone crisis became clear. Reuters reports that prices are now 123% above the crisis low point of 2013, after Ireland had been bailed out.
House prices were up by 14% in Ireland in the year to June – faster growth than the UK experienced in the year to May. If it’s all making you feel a bit uneasy, analysts insist that the lessons have been learned – and hopefully the boom will not result in the empty, half-finished developments that became a symbol of the crash (see the photo).
Reuters reports:
The system remains “much safer” than previously, Goodbody Stockbrokers chief economist Dermot O’Leary said.
“The macro-prudential rules are a crucial distinguishing feature,” he said, pointing to the curbs that limit mortgage lending to 3.5 times a borrower’s gross income.
Buyers also have to have a deposit of at least 10% compared to the 100% mortgages offered during the runaway Celtic Tiger economic boom that ended in the eurozone’s costliest banking rescue.
As if the UK did not have enough on its plate, today large parts of England have officially been declared to be drought zones.
The prolonged dry conditions, with some areas of the country not receiving significant rainfall all summer, have caused the National Drought Group to declare an official drought, the Guardian’s Helena Horton reports.
The Environment Agency has moved into drought in eight of its 14 areas: Devon and Cornwall, Solent and South Downs, Kent and south London, Herts and north London, East Anglia, Thames, Lincolnshire and Northamptonshire, and the east Midlands. Documents seen by the Guardian show the Environment Agency expects a further two areas will move into drought later in August. These are Yorkshire and West Midlands.
This means water rationing may take place across the country, with fewer barriers for water companies who wish to ban customers from using hosepipes and washing the car with tap water. More severe measures can also be put in place at this stage, including banning the use of sprinklers the cleaning of buildings, vehicles and windows.
There could be some obvious knock-on effects on the UK economy. Most notably, farmers have to cope with a shortage of a necessity for life of plants and animals.
Commercial car washes and swimming pools could also face restrictions, and the government also has the power to restrict water used in manufacturing and food processing if necessary.
You can see just how dry it is in this photo from Copernicus, an EU satellite.
Yesterday, 11 August, #Copernicus #Sentinel3 🇪🇺🛰️ captured a new nearly cloudless image of the British Isles
— Copernicus EU (@CopernicusEU) August 12, 2022
The comparison of the (still)🟩 green #Ireland with England🏴 and eastern Scotland🏴 shows the magnitude of the ongoing drought#Heatwave2022 #HeatwaveUK pic.twitter.com/AmM0bXhGvK
Updated
UK trade deficit remains near lowest since 1955, with 'worse to come'
The UK ran up another big trade deficit in June, as the spiralling cost of gas and other products meant imports during the month were worth £11.4bn more than British exports.
If a country runs a persistent trade deficit it must generally fund that either by borrowing or selling assets – so it is not generally seen as a good thing to keep running growing deficits. It can also put pressure on a country’s currency.
Former Bank of England governor Mark Carney warned in 2016 that the UK relied on “the kindness of strangers” to fund its current account deficit with the rest of the world, and that the UK’s exit from the EU potentially testing that relationship.
The UK’s trade deficit, expressed as a share of GDP, has been larger in the first two quarters of this year than in any other two-quarter period since at least 1955, which is as far back as comparable records go, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. He said:
The trade data are grim, and will worsen further over the coming months, leaving sterling even more vulnerable than usual to any reduction in the willingness of overseas investors to supply the finance needed to sustain this excessive consumption.
His chart shows how big the move is in historic terms:
Spain says it could complete gas pipeline to France in less than a year
Spain has backed a call for a new gas pipeline linking it with the rest of Europe, as the EU countries examine ways to wean themselves from dependence on Vladimir Putin’s Russia.
A new gas connection linking Spain and France could be ready to operate within eight or nine months, Spanish energy minister Teresa Ribera said on Friday.
Gas is generally transported via pipelines or in liquid form in massive ships. Since rthe invasion of Ukraine countries like Germany have struggled to find alternatives to Russia, on whom they have relied for abundant gas supplies, in part because of a lack of facilities to take gas off ships and into their domestic networks.
However, Spain has facilities for regasification – turning liquefied natural gas back into gaseous form – which could help with importing the fuel via the sea. A turnaround of less than a year would mean the dependence on Russia could be eased before next winter (although this winter is likely to be very tough).
In an interview with national TVE station, Ribera said:
This new interconnection, this gas pipeline could be operating in about eight or nine months on the southern border side, that is, from the Pyrenean to Spain.
Morrisons and Asda have joined Tesco, Sainsbury’s and several other major retailers in stopping the sale of disposable barbecues as the risk of wildfires climbs during dry conditions across many parts of the UK.
Both supermarkets said they were temporarily removing the product from sale in all stores because of the hot dry weather with an official drought expected to be declared in parts of south and east England today. Morrisons in March said it would remove disposable barbecues from sale within one mile of national parks to help prevent wildfires.
Their move leaves Lidl as the only major supermarket chain to continue selling disposable barbecues nationwide. Marks & Spencer, Waitrose and Aldi announced they will no longer stock disposable barbecues because of the potential detrimental impact they have on the environment and wildlife. The Co-op has stopped selling them close to national parks.
You can read more about Sainsbury’s and Tesco here:
The government is considering increasing the help on offer to British intensive energy users – the likes of steel, paper, glass, ceramics, and cement – as they struggle with the same surge in energy prices faced by households.
The energy crisis is being felt particularly sharply by companies making materials, because there is simply no way to make them in many cases without using large amounts of energy.
The government has launched a consultation into increasing subsidies. They are delivered via exemptions for some environmental and policy costs. At the moment the energy-intensive sectors are exempted from 85% of costs; that could go up to 100%.
About 300 businesses would be affected, although many of them are very prominent employers in local communities – Port Talbot’s steelworks are a good example.
The FTSE 100 has gained a bit of ground: it’s now up by 0.5%.
Gambling company Flutter is now up by 11%, with analysts focusing on the success of its US sports betting brand FanDuel. The US, which has weakened previously much stronger gambling laws, is the key focus for bookmakers, who are drooling over the prospect of taking billions of dollars from punters in the world’s biggest economy.
Analysts led by Ivor Jones at Peel Hunt, an investment bank, wrote:
FanDuel is shooting the lights out, with a 51% sports market share, an EBITDA [earnings before interest, tax, depreciation and amortisation] profit in 2Q22, and on course to be profitable for the full year in the 2023 financial year. What once looked like unsustainable success in the US is increasingly par for the course, with positive implications for valuation.
If the government response will be crucial to how the UK economy fares over the winter, then this pledge from Conservative leadership candidate Rishi Sunak could be important: he has said he will spend £10bn to help households with energy bills.
Writing in the Times this morning, he said that he was open to “limited and temporary, one-off borrowing as a last resort to get us through this winter” (to add to the temporary, one-off borrowing during the pandemic). Spending cuts are also on the table he said, without detailing them.
That would pay for a £5bn VAT on energy bills and another £5bn on giving more direct support to vulnerable households.
While that is less than the amount thought to be necessary by some analysts, the pledge will nevertheless likely raise pressure on Liz Truss, thought to be the frontrunner in the race to replace Boris Johnson as prime minister.
Some handy analysis from James Smith, developed markets economist at ING, an investment bank.
He cautions that the second-quarter GDP numbers are “very hard to read”, but that he expects July GDP to rebound sharply because of the “artificial” comparison with the extra jubilee bank holiday. July monthly GDP will rise by roughly 0.7%, and overall third-quarter GDP by around half a percent, he reckons.
“A fall in fourth-quarter GDP now looks highly likely,” he says, although the extent of the decline will depend on how the next prime minister responds.
The Bank of England’s forecasts suggest the UK is in for a long slog, although hopefully not as deep as the global financial crisis, which scarred the global economy for the next decade.
The ONS said that real household consumption across the quarter fell by 0.2% in the quarter, but even then there are signs that the economy has been sustained by people enjoying themselves.
What happens to that spending in the next few months once the effects of inflation – particularly higher energy prices – come through? Remember, the energy price cap is due to increase from £1,971 to an expected £4,200 come January. That is an extra £2,000 that households will just have to find (unless the government steps in with a bigger intervention),
Derek Halpenny, head of research for Europe at MUFG Bank, said:
This weakness in services was partially offset by activity in two areas where nearly all the services growth came from – accommodation and food service activities and arts, entertainment and recreation underlining the boost from the Jubilee celebrations.
Business investment jumped 3.8% Q/Q and is a welcome stronger element of the report but follows a long period of post-Brexit weakness.
The better June print doesn’t change the overall backdrop and won’t alter at all the BoE’s outlook and hence its policy outlook. The BoE was forecasting a rebound in third-quarter GDP before we enter the five-quarter period of GDP contraction and today’s data doesn’t change that.
Small businesses, particularly retailers, are worried. Martin McTague, national chair of the Federation of Small Businesses, said:
The 0.2% real-terms fall in household consumption despite rises in outlay on housing and travel is a flashing alarm for small businesses, many of whom rely on consumer spending.
With levels of fuel poverty skyrocketing, fuel and energy costs far higher than they were in the same quarter last year, and rent costs rising steadily, there is less left in people’s pockets for holidays, new clothes, meals out, and other discretionary spending, leading to lower sales for many small businesses.
The 1% fall in the wholesale and retail trade over the quarter is deeply concerning, with supply chain disruption causing huge headaches and extra expense for businesses.
UK economy has 'likely entered recession' - Niesr thinktank
The analysts have had a bit more time to digest the figures. The National Institute of Economic and Social Research, a respected thinktank, thinks that the UK has already entered a recession.
It said: “It now looks like the UK economy entered a recession in the second quarter of this year as GDP fell by 0.1%, and we expect output to continue falling over the next three quarters.”
⚡️It now looks like the UK economy entered a #recession in the second quarter of this year as GDP fell by 0.1%, and we expect output to continue falling over the next three quarters. On the expenditure side, the fall in Q2 was driven by a 0.2% fall in consumption; on the...
— National Institute of Economic and Social Research (@NIESRorg) August 12, 2022
1/2
output side, by a 0.4% fall in services, particularly, health & social work. #GDP fell by 0.6% in June after a revised rise of 0.4% in May as the Platinum #Jubilee celebrations affected the monthly profiles.
— National Institute of Economic and Social Research (@NIESRorg) August 12, 2022
Watch out for our full analysis, out shortly 📈
2/2
Pharma company GSK and its recently spun-off consumer goods arm Haleon have risen this morning, bouncing after a steep sell-off related to liabilities for heartburn pills that probably contained a cancer-causing chemical.
Shares in GSK and Haleon fell heavily on Thursday, by 10% and 4.9% respectively, as investors became increasingly concerned about litigation from 3,000 former users of the medicines.
GSK has told Haleon that it too could be liable if the plaintiffs are successful – not an auspicious start for a newly independent company.
GSK has come out swinging this morning, with a statement saying there is no link between its product and the cancers suffered by customers. It said:
GSK, independent cancer researchers, the US Food and Drug Administration, and the European Medicines Agency, have all undertaken extensive reviews of available data and conducted numerous investigations into this issue since 2019.
Based on these investigations and experiments, GSK, the FDA, and the EMA have all independently concluded that there is no evidence of a causal association between ranitidine therapy and the development of cancer in patients.
The overwhelming weight of the scientific evidence supports the conclusion that there is no increased cancer risk associated with the use of ranitidine. Suggestions to the contrary are therefore inconsistent with the science, and GSK will vigorously defend itself against all meritless claims alleging otherwise.
GSK shares gained 2% on Thursday, while Haleon rose 0.2%.
Updated
As the London Stock Exchange opens for trading, here are some of the big movers.
Flutter, the owner of gambling firms Paddy Power, Betfair and Sky Bet, has said that it sees “no discernible signs of a consumer slow down currently, but we are closely monitoring key spend indicators given the uncertain macro economic outlook.”
People lost 9% more on its websites and at its shops, “driven by recreational player growth”, it said. Its shares gained 7% on the FTSE 100, leading the blue-chip index.
But slightly smaller betting company 888 Holdings, which is buying the non-US William Hill business, is one of the top fallers on the mid-cap FTSE 250 index after its revenues fell by 13%.
888 said the UK’s “more stringent safer gambling policies” had contributed to a steep 25% fall in revenues – that suggests a lot of what it was doing before was at a level not acceptable to regulators now.
The FTSE 100 has gained ground at the opening bell. It is up by nearly 0.3% in the opening trades.
It is following the trend across much of Europe, where the major indices have edged up.
Here are the snaps from Reuters:
EUROPE’S STOXX 600 UP 0.1%
FRANCE’S CAC 40 UP 0.1%
SPAIN’S IBEX FLAT
EURO ZONE BLUE CHIPS UP 0.1%
There has not been much movement on financial markets in response to the GDP reading: sterling has been barely moved.
In the below chart you can see that it jumped by a few tenths of a cent on the dollar when the data was released – the reading was slightly better than expected by economists, remember. (N.B., the chart times are in GMT, not BST.)
However, it quickly fell back, and is now slightly down for the day. One pound will buy $1.2205 on spot markets this morning, 0.07% less than at the start of the session.
The question most analysts are asking is when, rather than if, a UK recession has truly started.
One talking point we might be hearing a fair bit about from the government is how the Queen’s jubilee celebrations have had an effect (although the ONS said they didn’t have a notable effect on the quarter).
This looks bad but clearly the extra bank holiday for the Queen’s Jubilee will have temporarily depressed GDP in June as with similar royal holidays in the past.
— John Hawksworth (@jhawksworth5) August 12, 2022
Headlines about recession should therefore be put on ice for now
(but may need to be thawed out for use next year) https://t.co/PDcFbYTKaz
Watch out for some contortions as people do their best not to blame Queen Elizabeth.
This is how the Treasury navigated it in its notes to editors (emphasis added, but you can just feel the tension): “It is important to recognise that the extra bank holiday in June had a one-off effect in reducing economic activity that month, although we all enjoyed the great national celebration of the Queen’s Platinum Jubilee.”
Holding a massive party right in the middle of a Cost of Living crisis - what was Lizzy thinking? She has to go. https://t.co/iqnsI3wU80
— Samuel Tombs (@samueltombs) August 12, 2022
Economy began slide into recession in 2022Q2. Higher prices and collapsing real pay have led to falling household consumption (-0.2%), driving first negative GDP figure (-0.1%) since the start of 2021.
— TUC Economics and Social Affairs (@TUCeconomics) August 12, 2022
Some more reactions are coming in now from analysts and economists.
David Bharier, Head of Research at the British Chambers of Commerce, a lobby group, said the UK economy is “moving in an alarming direction”. He said:
While some consumer-facing industries have benefited from further withdrawals of Covid restrictions on travel, the retail sector saw a 1% decline in the quarter, reflecting the unprecedented pressures from inflation and global supply chain disruption.
The 0.2% fall in real household consumption reflects continued weakness in consumer confidence and a mounting cost of living crisis.
Business investment remains a serious challenge. While investment in construction has increased, other forms of investment, including for machinery and equipment, continue to fall.
Hussain Mehdi, a macro and investment strategist at HSBC Asset Management, said:
UK growth is stagnating as the economy faces challenges from a severe real income squeeze amid elevated inflation and higher interest rates. In this backdrop, it will be difficult to dodge recession, especially with upside risks to energy prices heading into the winter.
Please do remember: this is not a technical recession (yet)!
Economists generally count two successive quarters of contraction as a recession. So if activity is declining again in the current quarter then it would qualify.
The Bank of England thinks the worst is ahead, as energy price rises begin to bite properly.
Economy found a reverse gear in June but Bank of England forecasts recession won’t begin until the winter.
— Joel Hills (@ITVJoel) August 12, 2022
This is based assumption:
1) energy cap rises to £3500 in Oct + remains elevated.
2) interests rise to peak at 3% next summer
3) no additional government support
If… pic.twitter.com/begZvphpEy
It should be remembered that the GDP reading is not quite as bad as economists had expected.
A poll of economists earlier in the week suggested there could be a 0.2% decline.
But one group who will be grimacing looking at today’s reading is the Bank of England, who did not expect a contraction in the UK economy to start until the final three months of 2022.
You can see how economic activity has peaked (at least temporarily) in the below chart from the ONS.
Nadhim Zahawi, the chancellor (for now, at least) is quick out of the blocks with a comment. He said:
Our economy showed incredible resilience following the pandemic and I am confident we can pull through these global challenges again.
I know that times are tough and people will be concerned about rising prices and slowing growth, and that’s why I’m determined to work with the Bank of England to get inflation under control and grow the economy.
The government is providing billions of pounds of help for households with rising costs, including £1,200 for eight million of the most vulnerable households.
The big contributors to the fall in activity included a 0.4% decline in the UK’s dominant services sector, in which activity slumped because of the end of many of the pandemic-related services such as test-and-trace.
There was a 0.2% decrease in real household consumption in the second quarter, the ONS said – a sign that people are feeling the financial pinch.
And of course we already know that inflation is here, but the GDP figures confirm that. The implied GDP deflator (an adjustment for inflation) rose by 6.0% year-on-year in the quarter, “primarily reflecting the 7.3% increase in the price of household consumption expenditure”.
That is the fastest annual household deflator growth rate since 1991, the ONS said.
UK GDP fell by 0.6% in June, but it isn’t quite as bad as it sounds.
Two things we need to take into account: the Queen’s Platinum Jubilee and the move of the May bank holiday led to an additional working day in May 2022 and two fewer working days in June 2022.
The ONS cautions that although this impacted on monthly GDP, there was little impact on the quarterly estimates.
Updated
UK GDP fell 0.1% in second quarter
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
UK gross domestic product (GDP) is estimated to have fallen by 0.1% in the second quarter from April to June 2022, according to the Office for National Statistics (ONS).
The UK economy grew by 0.8% in the previous quarter, according to the ONS. However, economists had expected the economy to falter in the second quarter, with a poll this week predicting a 0.2% decline in UK GDP in the period from April to June.
The Bank of England has already predicted the UK will enter a long recession from the final three months of this year, with the economy only growing again in the first quarter of 2024.
A big reason for that expected recession is inflation and the Bank’s response to it. The Bank’s rate-setting monetary policy committee already voted last week for the biggest rate increase in 27 years in order to try to slow the pace of price increases.
Energy price rises are at the heart of the economic issues facing the UK and many other economies around the world. Annual average household energy bills are forecast to top £4,200 from January and £4,400 from April, according to forecasts from Cornwall Insights, a consultancy.
The state of the economy and the cost of living crisis are almost certain to be the top priority for the new prime minister, either Liz Truss or Rishi Sunak, once the Conservative party leadership race is decided by 5 September.
Current Prime Minister Boris Johnson has repeatedly said he will not take action on economic policy in his last few weeks as a lame duck leader, so as not to bind the hands of his successor. Johnson reiterated the message on Thursday in a meeting with energy company bosses, some of whose businesses have reported booming profits thanks in part to the invasion of Ukraine by Russia, which has raised concerns about global supplies.
However, opposition politicians, union leaders and campaigners have all urged the government to speak to the two leadership contenders’ teams about emergency actions to prepare for what is expected to be a very difficult winter for households.
The agenda
10am BST: Eurozone industrial production (July; previous: 0.5% month-on-month growth; consensus: 0.2%)
1pm BST: UK Niesr monthly GDP tracker (July; previous 0.2%)
