UK economy ‘idling’ as GDP growth hit by shortages
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4.30pm: Blue chips close week in green
The FTSE 100 closed 4.73 points higher at 7,028.94.
8.15am: Market rises
The FTSE 100 was trading 16.5 points higher 7,040.73 as forecast, despite slower than expected GDP growth (see below).
8am: Toyota cuts production
Toyota is cutting its annual production target by 300,000 vehicles as a slowdown in output at COVID-19 hit parts factories in Vietnam and Malaysia added to the global shortage of chips.
The Japanese car maker now expects to build 9 million vehicles in the year to 31 March, rather than 9.3 million.
8am: GDP growth worse than expected
The UK economy flattened in July, as supply chain problems and the pingdemic brought growth to a near halt.
GDP rose by a much weaker than expected 0.1%, according to the Office for National Statistics reports, and a sharp slowdown on June’s 1% growth.
That leaves the UK economy still 2.1% below its pre-coronavirus pandemic level in February 2020.
There was a 2.5% fall in retail trade, only partially offset by a 72.5% growth in travel agency, tour operator and other related reservation services
Construction output fell by 1.6%, with firms reporting delays in the availability and sourcing of construction products.
Industrial output grew by 1.2% boosted by the return to production of an oil field which had been temporarily closed for planned maintenance.
AJ Bell financial analyst Danni Hewson tweeted: “The engine is definitely idling.”
She added: What was interesting to note was the decent uptick in vehicle manufacturing which was unexpected after dire warnings from the SMMT last month, but it does signal that at least one major supply chain hurdle might have been partially overcome and that chip shortage might be easing up.
“But it’s unlikely that signals the beginning of the end for supply chain issues; all evidence seems to suggest things will get worse before they get better, and many people expect this Christmas to be beset with rising prices and shortages.”
William Bain, head of trade policy at the British Chambers of Commerce, said the data points to the effects labour shortages, particularly among HGV drivers, are having on exports.
“We will be keeping a close eye on the next set of data, in October, to assess the impact this is having on food imports.
“Overall, the figures remain concerning. Taken in conjunction with German trade data from earlier this week [Britain is on course to lose its status as one of Germany’s top 10 trading partners this year for the first time since 1950], the UK is clearly doing less trade with the EU than three years ago.