The UK economy shrunk by 0.6% in June, latest figures from the Office for National Statistics show.
The most recent Gross Domestic Product (GDP) data has sparked further fears that the UK is heading for a winter recession as the economy is crippled by a cost of living crisis.
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The services sector was the main driver of the fall, the ONS said. IT was down by 0.5% in June, largely because Covid test and trace activity significantly tailed off in the month.
Construction also dropped after seven consecutive months of growth – it was down by 1.4%, its first fall since October 2021.
The travel sector was also hit in a month of flight delays and cancellations – it fell by 6.2%.
The ONS said that having two fewer working days in the month because of the long Jubilee Bank Holiday weekend had not helped.
Accommodation and food service activities bucked the trend, up 2.1%. Restaurant booking site OpenTable recorded a 23% increase in people eating out around the Jubilee weekend.
But after a bumper period for second-hand cars, motor sales and repairs dipped by 3%.
The GDP drop follows growth of 0.4% in May, although this was revised down from 0.5% as the UK avoided recession.
Alice Haine, personal finance analyst at Bestinvest investment service, said: “A GDP contraction in the second quarter was always on the cards as the economy – battered by the cost-of-living crisis and the wider global challenges posed by the war in Ukraine – heads towards a recession at the end of the year.”
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The latest data will come as a crushing blow to millions of Brits who are contending with the cost of living crisis and rising prices.
Economists predicted the economy would show zero growth between April to May.
Inflation hit 9.4% last month as the price of everyday goods and products continues to soar. It is expected that inflation will top 13% by the end of the year.
And the Bank of England has warned households to prepare for a 15-month recession and the highest inflation rate in 42 years.
In what was named Black Thursday, last week, it raised interest rates by 0.5% – the biggest rise in over 20 years.
What is a recession and what does it mean for your finances?
A country is in recession if it experiences a period of economic decline over a sustained period.
This is generally indicated by a fall in GDP, which is the value of all goods and services, in two successive quarters.
This means recessions are not good news, because they tend to lead to unemployment and wage stagnation.
This consequently means the government gets less tax which could mean cuts to services and benefits, or that rates go up.
There are lots of different reasons why a country may head into recession.
The UK last went into recession in 2020 due to the coronavirus pandemic.
There was also a more severe one in 2008/9 when the global financial crisis hit.
Going into recession can have a big impact on your finances and job losses are common as companies let people go to cut their costs and stay afloat.
Job losses are common, as companies try to cut their costs to stay afloat.
The number of people in debt and arrears is also likely to soar, and there could be more defaults on loans and mortgages or repossessions and bankruptcies.
