UK economic rebound stronger than previously thought in Q2
The UK’s economic rebound was faster than expected in the second quarter as spending increased after the lockdowns were lifted, official figures show.
The Office for National Statistics (ONS) said gross domestic product (GDP) increased 5.5% between April and June after being revised up from the original estimate of 4.8%.
The ONS said that meant GDP was 3.3% lower than it was in the last quarter of 2019 before the pandemic, up from 4.4% previously estimated.
The main driver of the GDP upward revision was household spending, which contributed four percentage points of the 5.5% increase as restrictions eased to allow outdoor dining in April, and new restrictions were lifted in May.
While pent-up demand after the lockdown in early 2021 saw Britons increase spending, more recent GDP figures have shown a marked slowdown in the recovery in growth.
Figures at the start of the month showed economic growth slowed to 0.1% in July from 1.4% in June, and there are concerns that supply chain problems will further hamper recovery.
Martin Beck, Senior Economic Advisor of the EY Item Club, said: “The headwinds to growth due to the disruption of supply, the negative effects on household purchasing power, the feeling of rising prices inflation and energy prices mean that the recovery looks more fragile. “
However, he said, with record high job vacancies, favorable credit conditions and healthy household finances, “the recovery is far from short of support.”
ONS data showed that the health services and the arts sector performed better than initially thought, with households saving less and spending more as the economy opened up.
Jonathan Athow, deputy national statistician at the ONS, said: “Household savings fell particularly sharply in the last quarter from the record highs during the pandemic, as many people were once again able to spend on fuel. shopping, eating out and driving their cars. “
The ONS added that its revisions come after making “many improvements to sources and methods”, with more comprehensive data also from the health sector.
In the quarterly national accounts, the ONS also revised the first quarter figure for 2021, estimating that the economy has now contracted 1.4% better than feared, down from 1.6% previously. .
He added that the economy contracted a record 9.7% in 2020, after previously estimating a drop of 9.8%.
The latest data shows household spending jumped 7.9% in the second quarter, while the savings rate fell to 11.7% from 18.4% in the first three months of 2021, which was the second highest on record.
The figures showed the extent of the rebound in the hard-hit hospitality sector as restrictions were lifted and thanks to a boost from the Euro 2020 football tournament, with production of accommodation and food services soaring 87.6% in the quarter.
However, many sectors are held back by the current supply chain crisis and shortage of truck drivers, while soaring inflation is feared forcing consumers to curb spending.
The Bank of England recently lowered its third-quarter growth expectations to 2.1% from 2.9% previously forecast in August, partly blaming the more pessimistic view of supply chain problems and labor shortages. of work.
Separately, ONS figures also showed that the UK’s current account deficit – a measure of the country’s balance of payments with the rest of the world – narrowed slightly to £ 8.6 billion. in the second quarter, up from £ 8.9 billion revised in the previous three months. .
Excluding volatile precious metals, the deficit widened to £ 10.2 billion in the second quarter – or 1.8% of GDP – due to a declining UK trade balance and falling investment income foreigners.