2nd July 2022
Figures released last month by the Office for National Statistics (ONS) revealed that the economy returned to growth in May after contracting during April. In total, UK economic output rose by 0.5% across the month, significantly exceeding the consensus forecast from a Reuters poll of economists which had predicted zero growth.
ONS said the main sectors of the economy all expanded during May including construction, travel and manufacturing. The data also revealed significant growth within health services as one of the key drivers of growth during the month.
In spite of May’s rebound, analysts still expect the economy to come under increasing pressure in the coming months as the cost-of-living squeeze weighs heavily on households’ ability to spend. Recent survey evidence also points to weaker growth, with July’s preliminary headline reading of S&P Global’s Purchasing Managers’ Index recording the weakest rise in UK private sector business activity for 17 months.
Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “Economic growth slowed to a crawl in July, registering the slowest expansion since the lockdowns of early-2021.” And he added, “Forward-looking indicators suggest worse is to come.”
The latest economic forecasts from the International Monetary Fund suggest the global economy is also facing ‘an increasingly gloomy and uncertain outlook’. The international soothsayer now predicts global growth will slow from 6.1% last year to 3.2% in 2022 and 2.9% in 2023, downgrades of 0.4 and 0.7 percentage points from April’s projections. The UK is expected to be particularly hard hit, with growth next year forecast to be just 0.5%, the weakest among the G7 nations.