Economy contracts up 0.1% in second quarter

Shoppers walk through the rain on Oxford Street in London.

Tolga Akmen/AFP/Getty Images

The UK economy contracted in the second quarter of 2022, as the cost of living crisis hit the country.

Official figures released Thursday showed gross domestic product (GDP) contracted by 0.1% quarter on quarter in the second three months of the year, less than analysts’ forecast of 0.3%.

It comes after GDP grew 0.8% in the first quarter of the year.

Last week, the Bank of England warned it expects the UK economy to enter the longest recession since the global financial crisis in the fourth quarter. Meanwhile, inflation is expected to top 13% in October.

Monthly estimates showed GDP fell 0.6% in June, below the consensus forecast of 1.3%, but down from a revised 0.4% growth in May.

“Growth in the UK has stalled as the economy faces challenges from a severe real income squeeze amid high inflation and higher interest rates,” said Hussain Mehdi, macro and investment strategist at HSBC Asset Management.

“In this context, it will be difficult to avoid a recession, especially with upside risks to energy prices entering the winter.”

However, despite the macro headwinds, HSBC is backing large cap UK stocks to outperform this year given “exposure to commodity, value and defensive names”.

The Office for National Statistics, which publishes the growth figures, said the contraction was largely driven by a decline in services output, with the biggest impediment coming from health and social work, due to a decline in Covid-19. activities.

It found that household consumption fell by 0.2% in the second quarter, offset by a positive contribution from net trade.

This is a news item in development and will be updated shortly.

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