UK economy shrinks by 0.1% in Q2

LONDON - Britain's gross domestic product (GDP) is estimated to have fallen by 0.1 percent in the second quarter (Q2) of this year, said the country's statistics authority on Friday.

"Health was the biggest reason the economy contracted as both the test and trace and vaccine programs were wound down, while many retailers also had a tough quarter," said Darren Morgan, director of economic statistics from the Office for National Statistics (ONS).

In the second quarter, there was a 0.4 percent fall in services output, while production and construction output increased by 0.5 percent and 2.3 percent respectively, said the ONS.

The largest negative contribution to the output of the service came from human health and social work activities, and positive contributors include accommodation and food service activities as well as arts, entertainment and recreation activities, said the ONS.

The ONS also published its monthly estimates on Friday showing that the GDP fell by 0.6 percent in June, following a 0.4 percent increase in May.

"It now looks like the UK economy entered a recession in the second quarter of this year as GDP fell by 0.1 percent," said Stephen Millard, deputy director for macroeconomic modeling and forecasting from the National Institute of Economic and Social Research, a respected British thinktank.

"We expect output to continue falling over the next three quarters," said Millard while commenting on Friday's data.

Earlier this month, Britain's central bank, the Bank of England, warned that the UK economy will enter a recession from the fourth quarter of this year, saying that "the latest rise in gas prices has led to another significant deterioration in the outlook for activity in the United Kingdom and the rest of Europe."

The bank also expected UK's already-high inflation to rise to 13 percent in the fourth quarter, and to remain at very elevated levels throughout much of 2023.