London, September 30 (BUS): The British economy remained below its peak before the pandemic spread, according to data published on Friday, leaving the country further away from the Group of Seven other countries and underscoring the challenge facing new Prime Minister Liz Truss.
The Office for National Statistics said economic output unexpectedly rose 0.2% in April through June, after adjusting for a previous reading of 0.1% contraction, meaning the British economy has not yet fallen into recession, Reuters reported.
But the Office for National Statistics lowered its estimate of Britain’s recovery from the COVID-19 pandemic, reflecting a bigger hit to the economy than first thought in 2020 when health shutdowns shut down businesses across the country.
It said second-quarter gross domestic product remained 0.2 percent lower than it was at the end of 2019, down from its previous estimate of 0.6 percent.
“Despite the good news about the economy’s performance in the second quarter, the overall picture is that the economy is in worse shape than we previously thought,” said Paul Dills, an economist at Capital Economics.
And that was before the full effect of the rise in inflation and the jump in borrowing costs became apparent.”
Separate data showed that British house prices failed to rise on a monthly basis for the first time since July 2021, in the latest sign of a slowdown in the market caused by cost-of-living pressure and rising interest rates.
Britain’s new finance minister Kwasi Quarting last week published an economic plan that he said would stimulate growth through tax cuts.
But investors responded by selling the pound and British government bonds.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the numbers suggested the damage to the economy’s ability to grow from COVID-19 and Brexit has been greater than previously thought.
“These revisions will force the Office of Budget Responsibility to adjust its estimate of potential future GDP,” he said.
The recent turmoil in British financial markets has brought a new focus to the country’s huge current account deficit.
Friday’s data showed that the current account gap in the April-June period narrowed to 33.8 billion pounds ($37.60 billion). Economists polled by Reuters indicated a deficit of about 44 billion pounds. (dollar = 0.8990 pounds)
The deficit was down from the 43.9 billion deficit in the first quarter that was revised down from a previous estimate in part because energy companies, buoyed by higher prices, made more profits overseas than initially thought.
The Office for National Statistics said the January-March deficit remained the largest ever.
Truss and Quarting are due to meet the head of Britain’s independent financial watchdog on Friday as the government looks to reassure investors.
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