The UK financial system shrank between April and June, official figures present.
The financial system contracted by 0.1% within the second quarter of the 12 months, the Office for National Statistics (ONS) stated.
That compares to the primary three months of this 12 months when gross home product (GDP) – which measures financial exercise – grew.
The Bank of England has forecast the UK will fall into recession in the direction of the top of this 12 months and the downturn will final for everything of subsequent 12 months.
As effectively as releasing figures for the second quarter, the ONS additionally introduced that the financial system shrank by 0.6% in June because of the further financial institution vacation to rejoice the Queen’s Platinum Jubilee.
However, that determine was a lot better than the 1.3% fall predicted by a consensus of economists polled by Reuters.
The ONS stated that whereas the financial institution vacation impacted on month-to-month GDP, it had “little impact” on the quarterly determine.
Commenting on the 0.1% contraction between April and June, the ONS stated that the largest contributor was from “human health and social work activities” as Covid check and hint and vaccination programmes have been wound down.
However, it stated areas reminiscent of tourism, bars and leisure confirmed sturdy progress.
“Health was the biggest reason the economy contracted as both the test and trace and vaccine programmes were wound down, while many retailers also had a tough quarter,” stated Darren Morgan, director of financial statistics on the ONS.
“These were partially offset by growth in hotels, bars, hairdressers and outdoor events across the quarter, partly as a result of people celebrating the Platinum Jubilee.”
Chancellor Nadhim Zahawi stated: “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.”
Yael Selfin, chief economist at KPMG UK, stated that regardless of the financial system shrinking within the second quarter, it’s “too early to call a recession”.
A recession is outlined because the financial system getting smaller for 2 consecutive three-month intervals. In the primary three months of this 12 months, the UK financial system grew by 0.8% earlier than shrinking between April and June.
“Temporary factors such as an extra bank holiday and the phasing out of the test and trace scheme were behind the fall in GDP in the second quarter,” stated Ms Selfin.
“While we see increasing signs of underlying weakness in the economy, we expect a more severe downturn to take place only from towards the end of this year.”