Shoppers stroll by way of the rain on Oxford Street in London.
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The U.Okay. economic system contracted in the second quarter of 2022, because the nation’s cost-of-living disaster hit house.
Official figures printed Friday confirmed that gross home product (GDP) shrank by 0.1% quarter on quarter in the second three months of the 12 months, lower than the 0.3% contraction anticipated by analysts.
It comes after GDP expanded by 0.8% in the primary quarter of the 12 months.
Last week, the Bank of England warned that it expects the U.K. economy to enter its longest recession since the global financial crisis in the fourth quarter. Inflation, meanwhile, is projected to peak above 13% in October.
Monthly estimates confirmed that GDP fell 0.6% in June, lower than the 1.3% consensus forecast, however down from a revised 0.4% enlargement in May.
“U.K. growth is stagnating as the economy faces challenges from a severe real income squeeze amid elevated inflation and higher interest rates,” stated Hussain Mehdi, macro and funding strategist at HSBC Asset Management.
“In this backdrop, it will be difficult to dodge recession, especially with upside risks to energy prices heading into the winter.”
The U.Okay.’s vitality value cap has been projected to hit £4,266 ($5,191.96), in response to consultancy Cornwall Insight, which would go away hundreds of thousands of households struggling to pay their payments.
Despite the macroeconomic headwinds, nevertheless, HSBC backs large-cap U.Okay. equities to proceed to outperform this 12 months given “exposure to commodity, value and defensive names.”
The Office for National Statistics, which publishes the expansion figures, stated the contraction was largely pushed by a fall in providers output, with the most important drag coming from well being and social work actions, reflecting a decline in Covid-19 actions.
It famous that there was a 0.2% fall in family consumption in the second quarter, offset by a optimistic contribution from web commerce.
“Like clockwork, inflation has started to take a toll on U.K. economic activity, with household expenditure contracting by 0.2% quarter on quarter,” stated Barret Kupelian, senior economist at PwC.
Inflation hit a 40-year excessive of 9.4% in July and is predicted to proceed rising by way of to autumn.
“There was some positive news on consumer facing sectors including in hospitality, but these are likely to be short-lived once cooler weather sets in and tourism activity subsides,” Kupelian stated.
“The U.K. has entered a low-growth, high inflation environment. With the Bank of England tightening financial conditions, eyes are now on policymakers to help shape the future sources of growth.”
This is a growing information story and will likely be up to date shortly.