(Adds details, background)
LONDON, Sept 10 (Reuters) - Britain's economy barely grew in
July, as the spread of the Delta variant of COVID-19 took hold
following the easing of lockdown restrictions, official data
showed on Friday.
Economic output rose just 0.1% in July, the Office for
National Statistics said, the smallest monthly increase since
January when Britain went into a new national lockdown
Economists polled by Reuters had mostly expected
month-on-month growth of 0.6% in gross domestic product. Only
two of the 26 analysts had expected such a weak reading.
Finance minister Rishi Sunak said the recovery was well
underway but the weak growth is likely bolster the case of Bank
of England policymakers who think it is premature to start
talking about raising interest rates - despite signs that
inflation is set to rise sharply.
"Stalling GDP and rising inflation will leave a whiff of
stagflation in the air," said Paul Dales, chief UK economist at
the Capital Economics consultancy.
Britain saw a sharp increase in COVID-19 cases in July as
the Delta variant spread rapidly, leading to hundreds of
thousands of workers being ordered to stay at home under
self-isolation rules which have been relaxed.
The ONS said some businesses had complained of staff being
unable to come to work because they were required to
self-isolate and a fall in construction output was linked to
post-lockdown problems in global supply chains.
Britain's dominant services sector was flat in July from
June with output in consumer-facing services falling for the
first time since January, driven mostly by a drop in the retail
sector.
Industrial output grew by 1.2%, boosted by the return to
production of an oil field, but manufacturing was flat.
Construction output fell by a monthly 1.6%.
Previously released data had suggested the post-lockdown
rebound in the economy lost momentum in July with retail sales
and consumer borrowing both falling and businesses reporting a
slowdown in growth, according to surveys of purchasing managers.
(Reporting by William Schomberg and Andy Bruce; editing by
William Schomberg)