By Ian McConnell

The UK economy contracted in July, having been estimated previously to have achieved marginal expansion, and news yesterday of 0.4% growth in August failed to alleviate concerns in some quarters about the outlook.

The Office for National Statistics said yesterday that UK gross domestic product had fallen by 0.1% in July, having estimated growth of 0.1% previously.

And, although it reported a 0.4% rise in UK GDP for August, the picture was mixed, with construction output falling by 0.2% month-on-month amid supply-chain woes and inflationary pressures.

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The ONS said: “Construction output recently peaked to be 0.9% above its pre-coronavirus…pandemic level in April 2021 but in August 2021 is now 1.5% below that [February 2020] level. This reflects recent challenges faced by the construction industry from rising input prices and in delays to the availability of construction products, notably steel, concrete, timber and glass.”

GDP in August was 0.8% below its February 2020 level, the ONS data show. Services output grew 0.3% in August.

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Emma-Lou Montgomery, associate director at fund manager Fidelity International, said: “August’s 0.4% growth marks a small rebound on July’s stalling GDP figures, yet the worry remains that economic growth won’t even be in touching distance of pre-pandemic levels until well into next year. Shortages of HGV (heavy goods vehicle) drivers and supply-chain disruption [continue] to trouble multiple sectors and [are] clearly dampening consumer confidence. Forecourts and shelves have been left empty, with mass recruitment drives yet to attract the number of staff urgently needed.”

She added: "This all comes in the crucial lead up to Christmas, when suppliers and retailers should be firing on all cylinders. But with households facing steep price rises for everyday items, from the food shop through to the gas bill, there will be little desire – or capacity – to spend, spend, spend."