In July, the UK's economic recovery slowed. Niklas Halle’n/Getty Images
The UK's economy grew by 0.1% in July, which is well below the expectations of economists.
Economists stated that rising COVID cases, supply issues, and staff shortages had a negative impact on growth.
Following the release of data, the pound and the country’s FTSE 100 stock market index rose.
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Between June and July, the UK's economy shrank by a combination of rising coronavirus infections and supply-chain problems. The Office for National Statistics reported Friday that the UK's coronavirus recovery was in a lower gear.
The 0.1% increase in gross domestic product in July was much lower than the 0.6% expected by economists polled at Reuters and the 1% growth in June.
Zero growth was recorded in the important services sector which accounts for around 80% of the economy. As the economy reopened, large falls in output at law and retail firms offset outdoor events growth.
Paul Dales, chief UK economist at Capital Economics, stated that the "measly increase" in GDP shows that, amid rising COVID-19 case and widening product/labor scarcitys, the economic recovery had stalled.
Dales stated that the 1.6% drop in construction output was due to "certainly shortages" within the sector.
Last week, the pound was 0.2% higher against the dollar at $1.387 while the FTSE 100 stock index in the UK was 0.344% higher.
Hussain Mehdi (macro and investment strategist at HSBC asset Management) also identified supply-chain and coronavirus as major problems for the UK's economy.
He said that a combination of issues such as rising covid cases, staff shortages, and supply disruptions had impacted GDP growth.
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The UK has lifted almost all coronavirus restrictions. England's government went the most extreme in its hope that high vaccination rates will keep deaths and hospitalizations low.
Despite a drop in the number of cases, many businesses have had to struggle to find workers since the economy has recovered.
Some businesses have been affected by international supply chain problems and material shortages. These are caused by rapid recovery of demand and coronavirus vase around the globe.
The UK's growth rate has risen sharply since the beginning of the year after it had fallen back quickly earlier in that year. However, GDP is still 2.1% lower than pre-pandemic.
Some economists are beginning to worry about stagflation, which is a combination of low growth and high inflation similar to the 1970s.
Dales stated that "we expect to find out next week that CPI inflation rose from 2.0% in Jul to 3.1% August." "Stagflation will be a lingering spectre if we have a stagnant GDP and a rising inflation."
