Financial system not out the woods regardless of bigger-than-expected soar in June, consultants say
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shock bounce in gross home product (GDP) is not going to imply a lot for hard-pressed households and companies and will even result in rates of interest being hiked additional, consultants warned on Friday.
Several consultants mentioned that whereas on the face of it the 0.5% rise in GDP in June was trigger for celebration, the unexpectedly excessive determine may additionally convey penalties.
Economists had anticipated development to be simply 0.2% in June, in line with a consensus provided by Pantheon Macroeconomics.
This underwhelming rebound in quarterly UK GDP highlights the worrying fragility in our economic system
“The better-than-expected GDP figures are likely to galvanise the Bank of England’s zeal to continue to raise interest rates,” mentioned David Baker, a companion at audit big Mazars.
“The Bank will remain very concerned about the persistence of inflation and will reflect on near full employment and high wage inflation as reasons to keep policy tight, despite higher mortgage rates denting consumer confidence and business surveys still pointing to lacklustre future growth.”
Suren Thiru, economics director on the Institute of Chartered Accountants in England and Wales, referred to as the expansion “underwhelming”.
He mentioned that the rise in June was only a rebound from May, when the coronation gave individuals an additional day without work, moderately than being a “meaningful improvement”.
“This underwhelming rebound in quarterly UK GDP highlights the worrying fragility in our economy as inflation, higher interest rates and waning customer demand weigh on activity,” he mentioned.
“While GDP bounced back strongly in June, this reflects more the reversal of the squeeze on output from the extra bank holiday in May, rather than a meaningful improvement in our growth trajectory.”
Small actions in a single path or the opposite gained’t imply a lot for a lot of corporations going through the hardest buying and selling circumstances in years
Mr Thiru warned that the UK is getting into a “more challenging period” the place inflation stays cussed and rates of interest excessive.
“GDP is likely to weaken considerably in the third quarter, despite a boost from lower energy bills,” he mentioned.
David Bharier, head of analysis on the British Chambers of Commerce, mentioned: “While the UK remains on course to avoid a technical recession, small movements in one direction or the other won’t mean much for many firms facing the toughest trading conditions in years.
“UK businesses are very adaptable, but they are looking for clear direction from the Government and the Bank of England, particularly on interest rate policy and a long-term plan to unlock investment.”