The U.K. economy experienced a larger contraction than anticipated in July, indicating a cooling of activity due to the monetary tightening measures by the Bank of England.
According to data from the Office for National Statistics, gross domestic product (GDP) declined by 0.5% compared to the previous month. This figure fell short of economists’ predictions, who had expected a more modest 0.2% decrease.
On an annual basis, the economy remained stagnant in July, contrary to economists’ expectations of a 0.4% growth.
This contraction follows a period of better-than-expected growth in the second quarter, driven primarily by a robust services sector. However, the downturn in July suggests that the Bank of England’s strategy of increasing interest rates is starting to cool down the U.K. economy.
Next week, the Bank of England will decide whether to raise its benchmark rate beyond its current level of 5.25%, as it aims to alleviate rapid price inflation.
Despite a slight rise in the U.K. jobless rate in the three months leading up to July, wage growth remained stable during the same period.
