The Numbers
The UK economy took a hit in July, with the Gross Domestic Product (GDP) falling by 0.5%, according to the latest figures from the Office for National Statistics (ONS). This decline can be attributed to strikes in the health sector and the impact of wet weather on retailers. However, the previous month saw a 0.5% increase, calming concerns of a recession. Economists had predicted a 0.2% decline for July, following the growth in June.
What is GDP?
GDP is a measure of the value of goods and services produced in a country. It reflects the size and growth of the economy. In July, services saw a 0.5% decrease after a 0.2% growth in June. Consumer-facing services, such as sports and recreation activities, saw no growth. Production output fell by 0.7% in July, while construction output decreased by 0.5%. Despite this, GDP increased by 0.2% in the three months leading up to July, with growth seen in all major sectors.
Cause and Effect
According to Darren Morgan, Director of Economic Statistics at the ONS, the broader economic picture is more positive, with growth across services, production, and construction in the past three months. He attributed the decline in July to healthcare worker and teacher strikes, as well as poor weather affecting construction and retail. He also noted that manufacturing fell back after a rebound in June. Inflation stood at 6.8% in July, lower than the previous month but above the Bank of England's 2% target. The upcoming inflation figures for August are expected to be affected by rising fuel prices.
Implications for Your Money
A healthy economy is one that is growing and not in recession. Fortunately, the UK managed to avoid a recession as GDP grew by 0.2% in the three months leading to July. Recession is characterized by two consecutive quarters of GDP decline. In a recession, jobs are lost, wages stagnate, and businesses may go into administration. This also leads to reduced tax revenue for the government, which can result in cuts to public services and benefits, as well as potential tax rate increases.
Tips for Protecting Your Finances
If you're concerned about your finances, there are steps you can take to safeguard your money:
- Build an emergency savings pot to cover unexpected expenses during times of high inflation.
- Consider asking for a pay rise at work, although there are no guarantees.
- Find better deals on car and home insurance, broadband, and mobile phone plans.
- Shop at cheaper supermarkets, opt for own-brand products, and look out for yellow-sticker bargains.
- Create a budget and review your bank statements to identify any unnecessary subscriptions.
- Find ways to earn extra money through side hustles or selling belongings.
- Don't ignore debts; staying on top of repayment is crucial.
Seeking Help
If you're struggling with debt, there are organizations that offer free advice, including National Debtline, Step Change, and Citizens Advice. Additionally, check if you qualify for any benefits or emergency funding provided by your local council. The rising cost of food, energy, and water bills may be covered through the Household Support Fund or welfare assistance scheme. Finally, it's worth noting that official figures released by the ONS yesterday indicate that wages continue to rise at their fastest recorded rate.
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