GDP growth slows to 0.1% in July

UK GDP growth is estimated to have slowed to 0.1% in July, new data published by the Office for National Statistics (ONS) has revealed.

Figures showed that GDP remains 2.1% below its pre-pandemic level from February 2020.

On a monthly basis, GDP growth slowed in July, rising by just 0.1% compared with 1.0% growth in June. This was still the sixth consecutive month of GDP growth, as COVID-19 restrictions continued to ease across the UK.

The ONS revealed that production output was the main contributor to July’s growth, increasing by 1.2%, which was mainly boosted by the reopening of an oil field production site. However, the output from the services sector remained broadly flat during the month and still remains 2.1% below its level from February 2020, before the UK first went into lockdown.

“Given July’s stat includes ‘freedom day’, a 0.1% GDP growth figure for July is fairly disappointing,” said Quilter Investors portfolio manager, Paul Craig.

“It was hoped household consumption would help drive the economic recovery, but given concerns around COVID cases and the ‘pingdemic’ that caused many to self-isolate, it shows the economy cannot solely rely on consumers and instead needs other areas of the economy to start delivering once more.”

Craig also labelled inflation as a “concern”, suggesting this could be enough to “spook” Bank of England Governor, Andrew Bailey, and the Monetary Policy Committee into not joining the European Central Bank and withholding its tapering plans.

“These environments are ones in which quality businesses can thrive, however,” Craig added. “Those with pricing advantages and strong competitive positions will benefit from an uptick in inflation, while those with established and resilient supply chains should overcome the current issues.

“Investors will want to pay attention to these businesses as the recovery plays out as that is ultimately where the value will lie.”

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