UK Follows US, Economy Shrunk 0.1% Last Quarter
The Office for National Statistics says the economy is essentially flat-lining:
- Gross domestic product (GDP) fell by 0.6% in June 2022, after growth of 0.4% in May 2022 (revised down from 0.5%), and was up 1.9% in the 12 months to June 2022.
- The Platinum Jubilee, and the move of the May bank holiday, led to an additional working day in May 2022 and two fewer working days in June 2022. This should be considered when interpreting the seasonally adjusted movements involving May and June 2022.
- Services fell by 0.5% in June 2022, and was the main driver of the fall in GDP. A decline in human health activities was the largest contributor as test and trace activity reduced further and vaccinations continued to tail off, following the spring booster campaign.
- Production fell by 0.9% in June 2022, following an increase of 1.3% in May. This was mainly because of a fall of 1.6% in manufacturing following strong growth in May 2022.
- Construction also fell by 1.4% in June 2022, following seven consecutive months of growth.
- Output in consumer-facing services remained flat in June 2022, following a fall of 0.3% in May. Consumer-facing services were 4.9% below their pre-coronavirus (COVID-19) levels (February 2020) in June 2022, while all other services were 2.7% above.
It should be noted that whilst the US entered a technical recession with two consecutive quarters of GDP contraction, their economy, like ours, is basically at full employment. It is also showing signs of bouncing. The US stock market is up 15% and the Federal Reserve is raising interest rates to cool inflation. If that is the template the UK follows, a recession – if it happens – should be short and shallow.