Shoppers walking in the rain on Oxford Street in London.
Tolga Akmen/AFP/Getty Images
The UK economy contracted in Q2 2022 as the cost of living crisis hit hard.
Gross domestic product (GDP) contracted 0.1% quarter-on-quarter in the three months starting in the second quarter of this year, below analysts’ expectations of a 0.3% contraction, according to official data released on Thursday. .
This is after GDP expanded by 0.8% in the first quarter of this year.
Last week, the Bank of England warned that it expects the UK economy to enter its longest recession since the global financial crisis in the fourth quarter. Meanwhile, inflation is expected to peak above 13% he in October.
Monthly estimates show GDP contracting 0.6% in June, below the consensus forecast of 1.3% but down from May’s revised 0.4% expansion.
“The UK economy is in a slump as it faces challenges from rising inflation and severe real income pressure from higher interest rates,” said Hussein Mehdi, macro and investment strategist at HSBC Asset Management.
“A recession is difficult to avoid in such conditions as there is a risk of higher energy prices, especially towards the winter.”
However, despite macroeconomic headwinds, HSBC favors continued outperformance for UK large caps this year, given their “exposure to commodities, value and defensive names.”
According to the National Bureau of Statistics, which publishes growth rates, the contraction was largely due to a decline in service production, with health and social welfare activities being the biggest drag, reflecting a decline in Covid-19 activity. There is
Household consumption declined by 0.2% in the second quarter, offset by a positive contribution from net trade.
This is a news article in development and will be updated soon.