LONDON—The U.K. economy contracted in the second quarter as households facing soaring inflation cut back on spending and programs to contain the spread of Covid-19 were wound down, presaging tough times ahead for an economy that is expected to enter a lengthy recession.
Britain’s statistics agency said Friday that gross domestic product—a broad measure of the goods and services produced in an economy—fell 0.1% in the three months through June. Economists expected a 0.2% decrease in output, following a 0.8% rise in the first quarter.
Consumer spending fell 0.2% while services activity shrank 0.4%, driven largely by a decline in healthcare activities as Covid-19 vaccinations and testing eased.
The figures offer a fresh indication that the British economy is struggling under the weight of soaring gas bills and rising interest rates, and will add to fears after the Bank of England said the U.K. was poised to enter a lengthy recession in the final quarter of the year.
The decline in GDP worsened toward the end of the quarter. Data for June showed it contracted 0.6%, undoing the 0.5% growth of the previous month. The U.K. is unusual among major economies in offering monthly measures of performance. Economists polled by The Wall Street Journal had expected a 1.3% decline in June.
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While better than feared, the data will be cold comfort for U.K. households and the two lawmakers vying to take over from
as prime minister. Mr. Johnson’s successor will inherit an economy struggling with multi-decade-high inflation, a tight jobs market and an energy crisis that is expected to deepen.
The Bank of England last week said the U.K. would enter a recession in the final three months of the year and won’t exit it until the start of 2024—comparable in length to that during the financial crisis of 2008 but not as deep. Inflation is also expected to accelerate, reaching a peak of around 13% in October. The BOE raised interest rates by 0.5 percentage point last week, the largest…
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