United Kingdom: Economic activity bounces back in August
GDP increased 0.4% in month-on-month seasonally-adjusted terms in August, which contrasted July’s 0.1% decrease. August’s reading was largely driven by a recovery in the services sector, amid the lifting of remaining Covid-19 restrictions and the relaxation of self-isolation rules. In addition, the manufacturing sector rebounded on stronger vehicle production, after chip shortages had hampered car manufacturers in previous months. As a result, the economy was only 0.8% below its pre-pandemic level reached in February 2020.
On a rolling quarterly basis, GDP grew 2.9% in June–August, which was below May–July’s 4.2% expansion.
Notwithstanding August’s rebound, the economy likely slowed notably from Q2 in Q3 as a whole, due to the resurgence in Covid-19 cases since late June, and acute shortages of staff and inputs.
On the reading, James Smith, economist at ING, said:
“On the face of it, August was only a little better than July for the UK economy—at least compared to the bumper growth of the second quarter. […] the overall third-quarter GDP figure is set to come in around half the Bank of England’s 3% forecast. Having said that, the underlying details offer a slightly brighter picture. Activity in hospitality and recreation/culture is essentially back to pre-virus levels, which suggests that the economy weathered the Delta Covid-19 wave better than we’d feared at the time. The recent retracement in retail activity is less a reflection of Covid consumer caution, and more a simple rebalancing of spending back towards services.”