Martin Beck

The June decrease is attributed to the Platinum Jubilee and the move of the May bank holiday leading to “an additional working day in May 2022 and two fewer working days in June”. The ONS has said: “although this impacted on monthly GDP, there was little impact on the quarterly estimates.”

Real household consumption decreased by 0.2% in the second quarter as many households greatly reduced expenditure to prepare for future financial woes as a recession and higher energy prices are expected.

Martin Beck, chief economic advisor to the EY ITEM Club, said: “After GDP growth in May was likely boosted by its usual late bank holiday being moved to the following month, that move – combined with an extra public holiday to celebrate the Queen’s Jubilee – appears to have had the opposite effect in June. GDP fell 0.6% month-on-month (m/m), repeating the pattern of previous jubilee months in 2012 and 2002.

“The sectoral performance was also suggestive of a jubilee effect. With services activity gaining some support from people spending more on hospitality on their extra day off, a 0.5% decline in services output was smaller than falls of 0.9% in industrial production and 1.4% in construction output.

He added: “June’s performance meant the economy contracted 0.1% in Q2, in line with the EY ITEM Club’s expectation but a bit less than the Bank of England’s forecast of a 0.2% fall. Consumer spending fell 0.2% versus a rise of 0.6% in the previous quarter. But this was mitigated by a positive contribution from net trade.

“The EY ITEM Club expects the economy to return to growth in July and Q3, reflecting both periods having a full quota of working days. But mounting headwinds point to underlying momentum fading – energy bills will rise in the autumn, the Bank of England is likely to put more pressure on borrowers by continuing to raise interest rates and the global economic backdrop is weakening. As a result, the economy is forecast to grow very slowly over the coming year.

“But the EY ITEM Club is not yet forecasting a recession given the supports the economy still has, such as low unemployment and healthy household balance sheets. However, that judgement is looking increasingly tentative, and much will depend on any further government support.”

Ben Seager-Scott, head of multi-asset funds at Evelyn Partners, commented: “The UK economy faces pretty significant headwinds which could make life difficult for domestically-focussed firms.

“As we know, the UK stockmarket derives most of its revenue from overseas, and we continue to advocate favouring those larger global businesses listed in London whilst being more selective in the mid- and small cap space, particularly those that are focussed more on the UK economy.”