Statistics show higher growth than what economists expected. We’re facing a rather sizeable growth of 0.5% during the month and we’re facing expansion in every area of the economy including manufacturing, travelling, construction, etc.
However, due to higher running costs, businesses claim they had to increase customer prices. Therefore households wind up with less money to save or spend after paying for their necessities, and it will possibly worsen in the autumn when energy prices rise again. So, there is still a real risk that the economy could fall into a slump.
All of these mean whoever wins the leadership contest to become the next prime minister is faced with an important dilemma of how to tackle the cost of living and help gradually increase the household disposable incomes.
Nowadays businesses and households are hit by a record-high leap in prices that was due to the increase in energy costs with the inflation rate expected to reach 11% later this year; making it the fastest rate in the past 40 years.
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Growth; not fast enough
Nowadays the staff costs are far higher than before the pandemic struck since companies had to lift wages to overcome staff shortages back then. As a result, even though the sales rates match those in 2019, it doesn’t necessarily mean we’re in the same economic situation as we were pre-covid. Therefore, the growth is still considered to be far too slow.
However, the new chancellor Nadhim Zahawi said, “We’re working alongside the Bank of England to bear down on inflation and I am confident we can create a stronger economy for everyone across the UK.”
In the meantime, the consumers are showing signs of being pressured by the cost of living since wholesale and retail are tearing apart the economy. The ONS also reported that they were passing on price increases to consumers including fuel, electricity, nickel, cobalt, aluminium, steel, paper, fish and cooking oil.
Where the UK stands
The International Monetary Fund has reported that the UK is going to be the slowest growing economy among the world’s most powerful economies in 2023. However, the economic rebound we discussed earlier builds up solid hope for the rest of the year.
