The UK's GDP has shrunk by more than expected, following news of higher unemployment but also higher wages.
ADVERTISEMENTThe UK's GDP shrunk by 0.5% in July, more than was expected and battered by strikes in the health and education sectors and adverse weather that negatively affected retail trade.
It comes after the economy grew by 0.5% in June, the Office for National Statistics (ONS) said on Wednesday.
"Our initial estimate for July shows that GDP fell," said Darren Morgan, the ONS's director of economic statistics, in a post on X (formerly Twitter). "However, the broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months."
Chancellor of the Exchequer Jeremy Hunt reiterated the government's plan to half inflation to deliver "sustainable growth and pay rises that the country needs".
The ONS announced on Tuesday that while UK wages are on the rise, going up by 7.8% so too is unemployment, which rose to 4.3% between May and July.
The Confederation of British Industry said wage increases and lower energy prices compared to when they spiked in the wake of Russian's full-scale invasion of Ukraine should help households to ward off a recession.
It warned however that a loss of economic momentum in the third quarter, as is now described by businesses, could keep the economy slowing.
In addition to the sluggish economy and rising unemployment rates, the UK is also suffering from the highest inflation rate in the G7 at 6.8%, fuelling concerns that the Bank of England will continue to tighten monetary policy.
The pound lost ground on Wednesday after the GDP figures were published, falling by 0.36% to $1.2449 at around 07:00 GMT.
The UK is not alone in its negative outlook. Across the channel, Brussels announced on Monday that the EU is now predicted to grow by a modest 0.8% this year, slightly down from the 1% projected in spring, and by 1.4% in 2024.
The eurozone will see similarly downgraded rates: 0.8% in 2023 (compared to 1.1% in the previous estimation) and 1.3% in 2024.
