UK GDP update
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The UK economy grew sharply in the second quarter, up 4.8%, because consumers are eager to spend money with the relaxation of coronavirus restrictions and the country’s vaccination program.
The rapid quarter-on-quarter growth rate has allowed the economy to recover most of the land lost in the past two years. Nonetheless, the goods and services it produced between April and June decreased by 4.4% compared to the last quarter of 2019.
The growth rate is in line with market expectations, but slightly lower than the Bank of England’s 5% expansion forecast.
As the United States regained all lost ground in the second quarter, the euro zone’s output was 3% lower than its pre-pandemic peak during the same period. Data show that the UK’s economic performance is still lagging behind other advanced economies.
Samuel Tombs, a British economist at Pantheon Macroeconomics, said the data showed that although the G7 countries had the fastest growth in the second quarter, the UK was “still a laggard” among developed economies throughout the pandemic.
Economists also expect that as the Delta variant spreads in the UK and Europe, the pace of recovery will slow in the summer, forcing an average of 1 million people to self-isolate each week and preventing the tourism industry from recovering.
James Smith, a developed market economist at ING Bank, said: “The sharp increase in Covid-19 cases as of July seems to have blocked the path of recovery.”
However, Rishi Sunak welcomed the strong recovery in the second quarter as evidence of a “rebound” in the UK economy.
The British Chancellor of the Exchequer said in a statement: “I know there are still challenges to overcome, but I have full confidence in the strength of the British economy and the resilience of the British people.”
The growth rate in the second quarter was supported by the recovery in consumer spending, which increased by 7.3%, with spending on restaurants, hotels and transportation being the strongest.
The decline in government capital expenditures has led to a 0.5% quarterly decline in total investment, but companies have responded to the relaxation of restrictions by increasing business investment by 2.4%.
In addition to the quarterly national accounts, the National Bureau of Statistics also announced its first growth estimate for June, which is expected to increase by 1% for the month, accelerating the recovery from 0.6% in May.
Few people think that the growth rate continued when the delta coronavirus case wave swept across the UK in July, but the output level in June was only 2.2% lower than the February 2020 level.
As long as the virus is contained, the economy will return to its pre-pandemic output level by the end of the year.
Capital Macros UK senior economist Ruth Gregory said that monthly data show that “GDP will return in October to its pre-pandemic scale in February 2020, and the economy may still cause most forecasters. Surprised because it got rid of the pandemic without leaving too many scars.”
In June, the reopening of restaurants and bars led to a 10.1% surge in output in the food and beverage sector. With the sharp increase in visits to general practitioner operations, medical services have also made a strong contribution to the overall growth data.
Jonathan Athow, Deputy National Statistician, National Bureau of Statistics, said: “The UK economy continues to rebound strongly, the hotel industry has benefited from the first full month of in-room dining, and the reopening of many services has boosted advertising spending. .”