British quarterly GDP figures fell for the first time since the start of 2021, shrinking in the three months to June – although the slump was less than some analysts had feared.
GDP fell 0.1%, compared to 0.8% growth in the first three months of the year, according to official figures from the Office for National Statistics (ONS).
In the month of June alone, output fell 0.6%.
It was the biggest contraction since January 2021 – but fell short of the 1.3% drop predicted in a poll of economists conducted by news agency Reuters.
Britain’s services sector shrank 0.4%, but production output and construction output both rose in the quarter.
Sectors most exposed to the worsening cost-of-living crisis such as retail and restaurants, struggled.
In recent weeks, British companies pared back profits and earnings forecasts as consumers tightened their belts, with delivery unicorn Deliveroo (GB:ROO) cutting its revenue guidance.
As consumers shun big-ticket purchases, furniture retailer Made.com (GB:MADE) also slashed its earnings and sales forecasts for the coming months.
The National Institute of Economic and Social Research warned last month that the Bank of England would need to raise interest rates to 3% to bring down inflation.
Public holidays had been expected to exert a drag on the economy in June, as the month contained two bank holidays for the Queen’s Platinum Jubilee.
Samuel Tombs, economist from consultancy Pantheon Macroeconomics said, “It’s impossible to tell whether this reflects a smaller than usual hit from the Jubilee, or evidence that the economy has considerable underlying momentum.”