The latest stumble on the road to redemption for the UK economy may increase pressure for another interest rate hike before the end of 2023.
A wet July to blame for a shrinking economy
Strikes and showers in a wet July weighed on output leading to an unexpectedly sharp rate of contraction in the economy, according to official figures.
The Office for National Statistics said gross domestic product shrank 0.5% in July from June, worse than all forecasts in a Reuters poll of economists that had pointed to a contraction in gross domestic product (GDP) of 0.2% from June.
Sterling hit
Output had risen 0.5% in June, and the economy grew 0.2% over the three months to the end of July.
Sterling lost ground against the dollar on the data. It was merely a third of a cent.
But there was concern about the data, which showed that all major sectors of the economy – services, manufacturing and construction – declined in July.
Economy still weakening amid impact of strikes
The data underlined signs that Britain’s economy is weakening, perhaps by more than the Bank of England had expected ahead of its September interest rate meeting.
The ONS said the health sector was the biggest driver behind the 0.5% drop in services output and cited increased industrial action by doctors which led to nearly 200,000 cancelled appointments. Schools in England also saw strikes.
A sluggish economy
Unusually wet weather in July hurt output at retailers and in the construction sector, which fell 0.5%, the ONS said.
Yet the overall trend indicates a sluggish economy.
