This photo taken on Sept. 5, 2023 shows a view of Victoria Square which is under construction in front of the City Council in Birmingham, Britain. (Xinhua/Li Ying)
Britain's economic output shrank by 0.5 percent in July, pointing to a gloomy future with a renewed contraction expected.
LONDON, Sept. 13 (Xinhua) -- Britain's economic output shrank by a larger-than-expected 0.5 percent in July after growing 0.5 percent in June, the Office for National Statistics (ONS) said on Wednesday.
The output of all three main sectors dropped in July. The ONS said the services and construction sectors fell by 0.5 percent, and production went down by 0.7 percent.
According to the ONS, the decline in the services output was the main contributor to the fall in gross domestic product (GDP) in July.
"In July, industrial action by healthcare workers and teachers negatively impacted services, and it was a weaker month for construction and retail due to the poor weather. Manufacturing also fell back following its rebound from the effect of May's extra Bank Holiday," said Darren Morgan, director of economic statistics at the ONS.
"However, the broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months," Morgan noted.
"A busy schedule of sporting events and increased theme park visits provided a slight boost," Morgan added.
The ONS data showed Britain's GDP increased by 0.2 percent in the three months to July, with growth in all three main sectors.
However, "the cost-of-living crisis, high borrowing costs, bad weather and strikes have all conspired to be a bitter potion," said Susannah Streeter, head of money and markets at financial services company Hargreaves Lansdown.
This gloomy picture stands in sharp contrast with the more upbeat revision of the ONS at the start of September, which indicated that the economy was significantly larger at the end of 2021 than previously estimated, Streeter added.
Recent business surveys also point to a gloomy future. At 47.9 in August, down from 50.8 in July, the S&P Global/CIPS Flash UK PMI Composite Output Index posted below the neutral 50.0 threshold for the first time since January.
"A renewed contraction of the economy already looks inevitable, as an increasingly severe manufacturing downturn is accompanied by a further faltering of the service sector's spring revival," Chris Williamson, chief Business Economist at S&P Global Market Intelligence, said.
Britain's housing markets have been under mounting pressure as well. The average house price in August dropped by 4.6 percent from one year earlier, hitting the biggest year-on-year decrease since 2009, according to mortgage lender Halifax.
Kim Kinnaird, director at Halifax Mortgages, said he was not surprised "given the pace of mortgage rate increases over June and July."
"We do expect further downward pressure on property prices through to the end of this year and into next," Kinnaird said.
The Bank of England raised its benchmark interest rate to 5.25 percent in August. It came as the 14th consecutive rate hike since December 2021 as the central bank has battled against stubbornly high inflation, raising the interest rate to its highest since 2008.
A longer-term analysis of the overall trend "suggests that UK activity in the past year remains broadly flat. This suggests that we are increasingly seeing the lagged effects of tighter monetary policy in real economic data," Barret Kupelian, chief Economist at PwC UK, said. ■
