Press release

12 Aug 2022

June’s bonus holiday contributed to declining GDP – EY ITEM Club comments

The extra Jubilee bank holiday was probably the main reason behind a 0.6% month-on-month (m/m) fall in GDP in June. June’s contraction contributed to the economy shrinking 0.1% in Q2. Output is expected to rebound in July and Q3, with their full quota of working days, but weak growth or stagnation is likely further ahead.

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  • The extra Jubilee bank holiday was probably the main reason behind a 0.6% month-on-month (m/m) fall in GDP in June. June’s contraction contributed to the economy shrinking 0.1% in Q2. Output is expected to rebound in July and Q3, with their full quota of working days, but weak growth or stagnation is likely further ahead.  
  • The recent rise in gas prices points to a further rise in energy bills in the autumn, the Bank of England is set to continue raising interest rates and the UK will be affected by a slowdown in the global economy. The EY ITEM Club doesn’t yet expect a recession, but that judgement will be influenced by the size of any further government support.

Martin Beck, chief economic advisor to the EY ITEM Club, says: “After GDP growth in May was likely boosted by its usual late bank holiday being moved to the following month, that move – combined with an extra public holiday to celebrate the Queen’s Jubilee – appears to have had the opposite effect in June. GDP fell 0.6% month-on-month (m/m), repeating the pattern of previous jubilee months in 2012 and 2002. 

“The sectoral performance was also suggestive of a jubilee effect. With services activity gaining some support from people spending more on hospitality on their extra day off, a 0.5% decline in services output was smaller than falls of 0.9% in industrial production and 1.4% in construction output.

“June’s performance meant the economy contracted 0.1% in Q2, in line with the EY ITEM Club’s expectation but a bit less than the Bank of England’s forecast of a 0.2% fall. Consumer spending fell 0.2% versus a rise of 0.6% in the previous quarter. But this was mitigated by a positive contribution from net trade.

“The EY ITEM Club expects the economy to return to growth in July and Q3, reflecting both periods having a full quota of working days. But mounting headwinds point to underlying momentum fading – energy bills will rise in the autumn, the Bank of England is likely to put more pressure on borrowers by continuing to raise interest rates and the global economic backdrop is weakening. As a result, the economy is forecast to grow very slowly over the coming year.  

“But the EY ITEM Club is not yet forecasting a recession given the supports the economy still has, such as low unemployment and healthy household balance sheets. However, that judgement is looking increasingly tentative, and much will depend on any further government support.”