UK GDP growth was held at 0.1% for July after rising 1.0% the month before and below consensus forecast of 0.5%.
GDP remained 2.1% below the pre-pandemic level of February 2020.
Data was weaker than expected, but the pound resisted, expecting supply issues to keep upward pressure on prices and need to keep the Bank of England on alert for a possible tightening politics.
Growth in services stagnates, construction output falls again
There was a recovery in industrial production with a monthly increase of 1.2% with a rebound in oil production, but production in construction fell 1.6% and is now below levels before the pandemic, supply problems having undermined activity.
All sectors of the economy have been affected by the fact that workers have been forced to self-isolate due to the “pingemia”.
Output in the services sector was broadly unchanged for the month, as the rebound in the leisure sector was offset by lower retail sales, with consumer services posting the first decline since January.
Comment from the deputy national statistician of the ONS; “After many months in which the economy grew strongly, making up much of the ground lost from the pandemic, growth was generally weak in July.”
Athow added; “The service sector has seen no growth overall, with growth in IT, financial services and external events offsetting sharp declines in retail and law firms.
CBI Chief Economist Alpesh Paleja commented: “The UK’s economic recovery continued in July amid an accelerating ‘pingemia’. Labor shortages and supply chain disruptions have continued since then and are expected to have slowed growth as the fall approaches. ”
Ed Monk, associate director of Fidelity International expressed concerns about the outlook
“What’s worrying is that these numbers may not yet show the full effect of long-lasting supply chain bottlenecks. The problem spans multiple sectors, with growing concerns about shortages of manufacturing and construction materials, as prices for concrete, aluminum, steel, lumber and fuel continue to rise.
Paul Dales of Capital Economics was also concerned about supply issues; “There is no such ray of hope for construction, where July’s 1.6% m / m drop in production was the largest of four declines in four months. This is certainly due in part to shortages.
Kitty Ussher, chief economist at the Institute of Directors was more optimistic about the outlook;
“In the future, we expect the economy to continue its upward trend: the rollout of the vaccine has allowed schools to start the new term with fewer brakes on their activity, there is every reason to think so. that autumn will also be strong. “
Samuel Tombs of Pantheon Macroeconomics noted that the overall forecast will need to be revised down even if there is a rebound; “It is encouraging to see that most of the real-time indicators that we are tracking have since picked up. But the MPC’s forecast for 3% q / q growth in the third and fourth quarters is now out of reach – markets’ faith in a rate hike in the second quarter of 2022 is misplaced. “
Commercial reservations continue
The overall trade deficit widened to £ 4.9bn from £ 3.4bn the month before.
Ana Boata, head of macroeconomic research at commercial credit insurer Euler Hermes, said: “UK exporters are losing their competitive edge.
“Since their peak in 2017, financial services – the UK’s largest exporting sector – have steadily lost market share. The UK is the only one of the 10 biggest countries to see this happen, with Brexit compounding the decline. “
The British pound retreated briefly after the data, but quickly recovered its losses with the pound / dollar (GBP / USD) exchange rate around 1.3860 versus 1.3840 with the pound / euro exchange rate (GBP / EUR). ) remaining above 1.1700.
The FTSE 100 index opened up 0.3% as global markets moved higher.