UK economic growth updates
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Britain’s economy surged forward in the second quarter, growing 4.8 per cent as consumers eagerly spent money following the easing of coronavirus restrictions and the progress of the country’s vaccination programme.
The rapid quarter-on-quarter growth rate allowed the economy to recover much of the ground lost over the past two years. Still, it produced 4.4 per cent fewer goods and services between April and June than in the final quarter of 2019.
The growth rate was in line with market expectations, although a touch slower than the Bank of England’s forecast of 5 per cent expansion.
With the US having recovered all of its lost ground in the second quarter and eurozone output 3 per cent below the pre-pandemic peak in the same period, the figures showed the UK’s economic performance was still lagging behind other advanced economies.
Samuel Tombs, UK economist at Pantheon Macroeconomics, said the data showed the UK was “still the straggler” among advanced economies across the whole pandemic despite growing fastest among G7 countries in the second quarter.
Economists also expect the pace of recovery to have slowed over the summer as the Delta coronavirus variant spread across the UK and Europe, forcing an average of 1m people a week to self-isolate and stemming the recovery in the travel sector.
James Smith, developed markets economist at ING bank, said: “The sharp rise in Covid-19 cases through July appears to have stopped the recovery in its tracks.”
But Rishi Sunak, the chancellor, welcomed the strong second-quarter recovery as evidence that Britain’s economy was “bouncing back”.
“I know there are still challenges to overcome, but I feel confident in the strength of the UK economy and the resilience of the British people,” he said in a statement.
The second-quarter growth rate was underpinned by resurgent consumer spending, which rose 7.3 per cent with outlays at restaurants, hotels and transport the strongest.
A drop in government capital expenditure led to a quarterly dip of 0.5 per cent in total investment, but companies responded to the easing of restrictions by raising business investment by 2.4 per cent.
Along with the quarterly national accounts, the Office for National Statistics also published the first estimates for growth in June, which it estimated at 1 per cent in the month, raising the pace of recovery from a 0.6 per cent rate in May.
Few think that the rate of growth continued in July, when the Delta coronavirus wave of cases spread across the UK, but the level of output in June was only 2.2 per cent below the level in February 2020.
This puts the economy on a path to return to pre-pandemic levels of output before the end of the year as long as the virus remains under control.
Ruth Gregory, senior UK economist at Capital Economics, said the monthly figures showed that “GDP will return to its February 2020 pre-pandemic size by October and that the economy may yet surprise most forecasters by emerging from the pandemic without much scarring”.
In June, the reopening of restaurants and pubs led to a 10.1 per cent surge in the output of the food and beverage sector, with health services also contributing strongly to the overall growth figures as visits to GP surgeries increased sharply.
Jonathan Athow, the deputy national statistician at the ONS, said: “The UK economy has continued to rebound strongly, with hospitality benefiting from the first full month of indoor dining, while spending on advertising was boosted by the reopening of many services.”
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