We will avoid a slump, analysts say, as GDP falls

This week’s figures are expected to show the economy contracted in July, but city experts remain confident a slump can be avoided.

Analysts expect a combination of wet weather that hit retail sales and public sector strikes to hit output, which is estimated to have contracted by up to 0.4 percent over the month.

This follows growth of 0.5 percent in June, although this compares favorably with May when there was an additional holiday.

Keeping the purse strings in check: Analysts expect a combination of wet weather hitting retail sales and public sector strikes to hit production

Samuel Tombs, chief UK economist at Pantheon Economics, said that while growth was “sluggish”, the economy was still not “sliding into recession”.

“It should be clear from the breakdown of July’s GDP numbers that the decline is due to one-off setbacks rather than a general downturn.” The rain may have even boosted demand elsewhere, Tombs added, citing the rise in box office returns for the cinema blockbusters Barbie and Oppenheimer.

Investment bank Investec expects a decline of 0.4 percent for July, while Pantheon Economics forecasts a decline of 0.2 percent.

The weakening economy could also prompt the Bank of England to pause its series of interest rate hikes. Gov. Andrew Bailey said last week he believes the key interest rate — now 5.25 percent — is nearing the “peak of the cycle.”

He assumes that inflation, currently at 6.8 percent, will fall “significantly” by the end of the year.

The Office for National Statistics will release its latest GDP estimates on Wednesday. Any assessment of the economy is complicated by recent major revisions to GDP performance for 2020 and 2021.