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UK Economy Growth Slows To Historic Lows

As the final Covid limitations were relaxed in England, the UK economy expanded by barely 0.1 percent in July.

The economy grew for the sixth month in a row, although at a significantly slower pace than the previous month, when it grew by 1%.

The increase was aided by arts, entertainment, and recreational activities, but the “pingdemic” kept many employees at home.

According to the Office for National Statistics, the UK economy is still 2.1 percent behind its pre-pandemic high (ONS).

Outdoor activities such as sports clubs, amusement parks, and festivals, according to the ONS, have benefited from the relaxing of social distance rules in England on July 19.

The major driver of growth was a 1.2 percent increase in production output, which was bolstered by the reopening of an oil field production facility that had been shuttered for planned maintenance.

Jonathan Athow, the ONS’s deputy statistician, said: “The greatest increase came from oil and gas, which had largely recovered following summer maintenance. Automobile production has also recovered from recent component shortages.”

Many businesses had personnel shortages in July when employees were compelled to self-isolate at home after being warned by the NHS Test and Trace app, resulting in the “pingdemic.”

In July, service production remained virtually constant, while construction output fell for the fourth month in a row, falling by 1.6 percent.

A scarcity of building supplies has hampered construction as costs have risen and supply has fallen short of demand.

According to the ONS, GDP increased by 3.6 percent in the three months leading up to July.

A Deeper Analysis

July’s data, which show the economy’s recovery slowing, demonstrate that the recovery cannot be taken for granted. The primary cause was an increase in cases across the UK, which tempered the impact of the economy’s complete recovery. However, the effects of the supply chain problem are also seen in these numbers.

While August could have been better, these data are consistent with the steady drop in furlough numbers that has been occurring recently. The tendency appears to be that the UK experienced a very quick first bounce-back from the simple act of economic reopening. Monthly data is usually volatile, but the pattern appears to be that the UK saw a very rapid initial bounce-back from the sheer act of economic reopening.

Recovery will be more difficult when pandemic aid is phased down and the effects of labor shortages and trade issues begin to show up in the numbers. It was a little early to talk about a “boom.”

The rise for July was “smaller than most people expected,” according to Prof Jagjit Chadha, head of the National Institute of Economic and Social Research, who spoke to the BBC’s Today programme.

However, he added: “The economy is gradually returning to pre-pandemic levels. Along the road, there were certain to be potholes.”

A rise in Covid cases in July, according to Samuel Tombs of Pantheon Macroeconomics, “stopped the economic recovery in its tracks,” resulting in a “pingdemic” of employees instructed to self-isolate.

In August, he noted, there were signs that the economy had recovered speed.

“However, after being double-vaccinated, studies continue to reveal that a substantial percentage of families are still afraid of getting Covid-19.

“If, as we predict, Covid-19 cases and hospital admissions continue on their present increasing trajectory,” he added, “the rebound in consumer-facing industries may run out of steam again in the autumn.”

According to Kitty Ussher, chief economist of the Institute of Directors, “England’s exciting run” in the Euro 2020 competition looked to have bolstered growth in June, followed by “a bit of a fall-back” in July.

The numbers, according to Chancellor Rishi Sunak, demonstrate that the recovery is “well under way.” Conservative complacency, according to Labour’s Bridget Phillipson, shadow chief secretary to the Treasury, is “holding our country back.”

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