UK economic recovery slows to a crawl as ‘pingdemic’ bitesSeptember 10, 2021
UK business & economy updates
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The UK economic rebound slowed to a crawl in July as a surge in the Delta variant of coronavirus forced workers to self-isolate and consumers spent less, raising doubts over the strength of the recovery.
Output rose just 0.1 per cent in July on the previous month, the Office for National Statistics said on Friday, well below the 1 per cent expansion in June and weaker than the 0.6 per cent growth forecast in a Reuters poll of economists.
It was the weakest monthly performance since January and left gross domestic product, or GDP, 2.1 per cent below February 2020 levels, the last full month before the pandemic hit.
“The recovery is now entering a tougher phase,” said Andrew Goodwin, chief UK economist at Oxford Economics. Many risks remained in the coming months, he said, including the scaling back of government support and shortages of components and labour that would represent a growing constraint on activity.
The UK faces “permanent shortages” of staff in the food distribution sector, and supply chain issues are “going to get worse”, the Food and Drink Federation, a trade body, said on Friday.
Ian Wright, FDF head, said the days of consumers being able to expect “every product they want . . . all the time” in shops and restaurants were “over”.
The economy would have contracted in July if it was not for a 22 per cent expansion in mining and quarrying, boosted by the reopening of an oilfield after a temporary closure for maintenance.
“After many months during which the economy grew strongly, making up much of the lost ground from the pandemic, there was little growth overall in July,” said Jonathan Athow, ONS’s deputy national statistician for economic statistics.
Output in consumer-facing services fell 0.3 per cent in July. This was the first decline since January, mainly because of a 2.5 per cent drop in retail sales due to a spell of bad weather and a spike in coronavirus infections in mid-July that caused the so-called pingdemic, after the NHS Covid-19 app prompted hundreds of thousands to self-isolate.
The economic recovery “effectively was stopped in its tracks by the surge in Covid-19 cases in July”, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Since July, rules on self-isolation have been relaxed, while restaurant bookings and visits to shops, bars and restaurants have increased, pointing to a renewed expansion in some services. However, disruption to supply chains, the other main drag on growth, has intensified in August, according to a closely watched business survey.
Output in legal services contracted sharply in July. Kitty Ussher, chief economist at the Institute of Directors, said the dip in the legal, real estate and professional services sector reflected the partial ending of the stamp duty holiday at the end of June that caused a spike in…