Britain’s Economic Recovery Nearly Stopped in July

The British economy nearly stalled in July, even as most of the recent pandemic restrictions have been lifted. The services sector, which was the engine of the economic recovery this year, came to a standstill with the spread of the Delta variant across the country. forcing people to stay at home and consumer spending will decrease.

Gross domestic product increased by 0.1 percent A slower expansion than most analysts expected in July, compared to the previous month, according to an initial estimate by the Office for National Statistics. Despite the UK gaining for the sixth consecutive month, the speed was pretty slow.

The main reason for the growth of the economy was the reopening of an oil field after scheduled maintenance. Services and manufacturing output remained stable and construction contracted for the fourth month.

The statistics agency said output from the service sector, which includes shops, restaurants and hotels, fell for the first time since January, primarily due to a drop in retail sales. These services are still around 7 percent below their pre-pandemic levels. In the general services sector, the return of music festivals and other major events in July was not enough to offset declines in advertising, real estate and elsewhere.

At the same time, production was blocked. a struggle to fill in the blanks and construction companies are struggling with price increases and scarce materials such as steel and steel. timber.

The economy was still 2.1 percent below its pre-pandemic size in July and may struggle to fully recover as staff and product shortages weigh on economic activity.

“It will be difficult to make up for this recent ‘lost’ portion of GDP in output, as early gains from reopening are largely exhausted,” analysts at Royal Bank of Canada said in a note.

NS bank of england expects the economy to return to pre-pandemic size this year, but the pattern of recovery has changed. The central bank said last month that faster growth in the second quarter will be offset by a slowdown in the third quarter.

Since then, central bankers have been paying close attention to supply chain disruptions and their impact on inflation. Due to the persistence of the virus, the central bank failed to see demand rebalancing away from services (like travel and office meals) and goods (like cars and work-from-home equipment) as expected. Bank of England Governor Andrew Bailey told British MPs this week.

And so, he said, global demand for commodities is driving up the prices of commodities like oil and metals.

Policymakers expected supply bottlenecks to eventually resolve once the pandemic was over, but Mr. Bailey said he was more concerned. How long will mismatches in the labor market last? continue. Businesses in almost every industry are complaining about rising unemployment and not being able to fill positions even though many people are on leave from their jobs.

“We are currently seeing the recovery stabilize somewhat,” Mr Bailey said on Wednesday.