AJ Bell press comment – 30 September 2022
- UK GDP grew 0.2% in the three months to June vs the 0.1% fall that had been previously estimated
- But GDP is still 0.2% down from where it was pre-pandemic
- Figures show economy fell further in 2020 than had been thought – down 11%
Danni Hewson, AJ Bell financial analyst, comments on quarterly GDP figures:
“It’s cold comfort to households struggling to pay their bills but revised figures suggest the UK economy is not in a recession, at least not yet. To reach that milestone it needs to shrink for two consecutive quarters and despite previous estimates, Britain actually managed to eke out slim growth in the three months to June.
“But that good news is offset by the bad. Despite the end of lockdowns and life returning to somewhat normal, the UK economy has still not recovered its mojo as the only G7 country to have failed to claw its way back above pre-pandemic levels.
“And the real test is yet to come. The full extent of sky-high inflation and now increased borrowing costs will only begin to be truly felt in the second half of the year. Even with the government’s energy support package many households will see their bills shoot up, leaving them less cash to pay for any of those discretionary goods and services that help UK PLC soar.
“And many people are being cautious with the ONS noting that households have kept up pandemic savings habits where they can. Having a cushion to protect for unforeseen economic shocks will become even more vital over the coming months, but the amount that people can save will be eroded and for some those cushions will already have had a lot of the stuffing pulled out of them.
“The UK’s economy has been badly damaged by the double whammy of covid lockdowns and Brexit upheaval. While the current account gap did shrink over the three months to June, a weak pound will have taken its toll on the countries import costs.
“Looking at today’s figures, delivering sustained growth of 2.5% and above seems an even more difficult task. The new government says it has the right strategy, that it will lay out clearly in November, but judging by the past week two months might seem like a millennia.”
