GDP contracts in June as economy starts difficult period on weak footing

ONS GDP data published today (Friday) show the economy contracted by 0.6 per cent in June with growth in Q2 as a whole coming in at -0.1 per cent. This was slightly stronger than expected by financial markets and the Bank of England.

The fall on the month was heavily influence by the timing of the Platinum Jubilee which meant there was an additional working day in May and two fewer in June. But consumer-facing services were flat in June, having fallen by 0.3 per cent in May, and remain 4.9 per cent below their pre-coronavirus level.

With the Bank of England forecasting that inflation is set to pick up to 13.3 per cent in October, the outlook is a difficult one with the economy expected to fall into recession in the final quarter of this year.

James Smith, Research Director at the Resolution Foundation, said:

“While the contraction in June partly reflects the timing of Platinum Jubilee bank holidays, the economy has started a difficult period on a weak footing. And with the Bank of England forecasting that inflation will rise to over 13 per cent in October, and that the economy will slip into recession in Q4, the outlook is bleak.

“The first priority for the new Prime Minister will be to provide further targeted support to low-and-middle income households who will be worst affected by the stagflation that already seems to be taking hold.”