Shortages and ‘pingdemic’ punish economy as growth slows to just 0.1% in July
Coronavirus measures that forced scores of workers to self-isolate contributed to a bigger than expected slowdown in economic growth in July, according to official figures.
The Office for National Statistics (ONS) charted a rise in output of just 0.1% over the month following a 1% increase during June.
That was despite more businesses getting into gear, with furlough levels falling, following over a year of COVID-19 disruption.
July was the month that the so-called “pingdemic” hit its peak, with the ranks of people ordered by the NHS test and trace app to stay home, after a close contact notification, rising by more than 600,000 people a week in England alone at one stage.
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It forced the government to introduce quarantine exemptions at the end of the month to protect some key economic activities such as food production.
Economists had been expecting a rise in growth of 0.6%.
The ONS pointed to anecdotal evidence of a ‘pingdemic’ hit in July from responses to its monthly business survey.
It also noted a hit from wider labour and supply shortages – constraints which have deteriorated since July – with vacancies running at record levels above 1.7 million by one measure and scores of consumer-facing businesses revealing supply problems.
Its deputy national statistician for economic statistics, Jonathan Athow, said: “After many months during which the economy grew strongly, making up much of the lost ground from the pandemic, there was little growth overall in July.
“Oil and gas provided the strongest boost, having partially bounced back after summer maintenance. Car production also continued to recover from recent component shortages.
“The service sector saw no growth overall with growth in IT, financial services and outdoor events – which could operate more fully in July – offsetting large falls in retail and law firms.
“Meanwhile, rising costs and shortages of raw materials pegged back the construction sector again.”
The ONS said gross domestic product (GDP) remained 2.1% below its pre-pandemic peak.
The figures will be of concern to the Treasury as they reflect warnings delivered to the government about the effects the wider worker shortages are having – with supply failing to meet demand.
Chancellor Rishi Sunak said of the performance: “Our recovery is well under way thanks to the success of the vaccination rollout and the roadmap, with more employees on payrolls that at any point since last March.
“I am confident that – supported by our Plan for Jobs – we’ll continue to recover from the pandemic, we’ll see more new jobs, and we will Build Back Better.”
The CBI’s lead economist, Alpesh Paleja, said: “The UK’s economic recovery continued in July against the backdrop of the ‘pingdemic’ gathering pace.
“Labour shortages and supply chain disruption have continued since, and are likely to have taken the edge off growth as we head into autumn.
Empty shelves in a Co-op store in July. Twitter: @HapG86
“Businesses hope the bulk of supply disruption will prove temporary, but firms are not confident that all shortages will fade any time soon.
“To help ease these pressures, temporary, targeted interventions are needed to enable businesses to keep their doors open – for instance, placing HGV drivers on the Shortage Occupation List could make a real difference.
“Longer-term, both business and government must invest in reskilling and training, particularly in areas that support meeting future demand.”