United Kingdom: Economy continues to recoup lost ground in July
GDP rose 6.6% month-on-month in seasonally-adjusted terms in July, which followed June’s 8.7% increase. July’s reading was supported by growth in services, manufacturing and construction, and came amid a significant easing of Covid-19 restrictions at the start of the month. The economy has now recovered slightly over half the output lost in March and April.
On a rolling quarterly basis, GDP plummeted 7.6% in May-July, easing from April-June’s 20.4% fall.
Looking ahead, while the economy should continue to expand, the recovery is likely to lose some steam amid Brexit uncertainty and a likely rise in unemployment once the government’s wage subsidy scheme ends in October. A potential tightening of restrictions is a downside risk.
According to Kallum Pickering, senior economist at Berenberg:
“Soon, the rapid gains will give way to more moderate rates of growth as the recovery enters is second longer leg. This would be consistent with the experience of the US and Germany which are further ahead in the recovery than the UK […]. As the UK had to switch off more activities for longer due its delayed response to the pandemic, it has more activities to switch on again thereafter – hence the stronger rebound from a deeper trough.”