UK GDP falls by ‘worse than expected’ 0.5% in July

The UK economy shrunk by a “worse than expected” 0.5% in July as poor weather and industrial strikes impacted production, according to the latest statistics from the Office for National Statistics (ONS).

The ONS revealed that all of the main sectors fell in July 2023, with output in the services sector falling by 0.5% – marking the largest contribution to the fall in monthly GDP.

It comes as production output fell by 0.7% and construction output fell by 0.5%, the first month since June 2022 that all three sectors contributed negatively to GDP on the month.

The main contributor to the fall in monthly services output was the human health and social work activities sub-sector, which fell by 2.1% in July 2023. This was attributed entirely to a 3.4% fall in the human health activities industry.

Output in consumer-facing services showed no growth in July 2023, while all other services fell by 0.6%. The largest positive contributions to consumer-facing services in July 2023 came from the sports activities and amusement and recreation activities industry (up 12.4%) and wholesale and retail trade and repair of motor vehicles and motorcycles (up 2.2%).

The largest negative contributions came from retail trade, except for motor vehicles and motorcycles (down 1.2%) and travel agency, tour operator and other reservation service and related activities (down 3.2%).

However, overall over the three months to July the UK economy increased by 0.2% when compared with the three months to April 2023.

Director of Economic Statistics Darren Morgan said: “Our initial estimate for July shows that GDP fell; however, the broader picture looks more positive, with the economy growing across the services, production and construction sectors in the last three months.

“In July, industrial action by healthcare workers and teachers negatively impacted services and it was a weaker month for construction and retail due to the poor weather. Manufacturing also fell back following its rebound from the effect of May’s extra Bank Holiday. A busy schedule of sporting events and increased theme park visits provided a slight boost.”

Ben Jones, CBI lead economist, added: “Varied performance across sectors in July makes it difficult to separate the signal from the background noise. Manufacturing and construction output has been volatile recently and strikes continue to weigh on parts of the service sector. Consumer spending is similarly mixed – July was a washout for the retail sector, but a bumper month at the box office.

“While rising wages and lower energy prices should aid households and help keep recession at bay, the loss of economic momentum through Q3 now being reported by firms could keep the economy stuck in a low gear.With encouraging investment key to delivering growth, the Autumn Budget provides a vital opportunity to shore up business confidence. CBI analysis shows that a permanent full expensing regime could boost GDP by 2% by 2030/31 – with benefits felt across the whole economy.”