UK economic rebound stronger than expected in second quarter
LONDON: Britain’s economy performed better than expected in the second quarter, as households spent more and saved less following easing lockdown restrictions, official data showed on Thursday.
Gross domestic product in the three months to June jumped 5.5 per cent, up sharply from a prior official estimate of 4.8 per cent, the Office for National Statistics said in a statement, citing also ONS accounting changes.
GDP output has slowed since then, however, with the Bank of England warning that the recovery is flattening because of ongoing pandemic fallout and supply chain bottlenecks.
The outlook also darkened on Thursday with the end of the UK government’s costly furlough scheme, threatening a spike in unemployment after supporting millions of private-sector jobs during the pandemic.
Added to the mix, consumers and businesses are contending with runaway gas prices and a chronic shortage of lorry drivers that has helped spark a run on motor fuel.
“While the upward revisions to GDP are clearly welcome, the second quarter was three months ago, and the recovery appears to have stagnated since,” said Ruth Gregory, senior economist at research consultancy Capital Economics.
Recent official data showed the UK economy grew by just 0.1 per cent in July. The ONS on Thursday added that the economy shrank by 1.4 percent in the first quarter, up from the previous estimate of a 1.6-percent contraction.
In the second quarter, “household saving fell particularly strongly… from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars”, said ONS statistician Jonathan Athow.
“Today we’ve published new, revised estimates of GDP, which include numerous improvements to sources and methods,” he added.
The ONS noted however that the British economy remained 3.3 per cent below its level in the final quarter of 2019 before the pandemic struck.
Thursday’s news means that Britain was no longer a laggard in the G7 group of richest countries, according to Pantheon Macro economist Samuel Tombs.
The upward revision in the second quarter brings the UK economy’s performance in line with other G7 economies, he said.
“The 3.3-per cent shortfall in GDP from its fourth-quarter 2019 peak now is identical to that seen in Germany, similar to the 3.2-per cent shortfall in France, and better than the 3.8-per cent shortfall in Italy,” he added.
Britain’s strong second-quarter recovery was fuelled by consumer spending, while the government continued to provide massive financial support, notably on its jobs support scheme.
Commentators fear the end of furlough will spark soaring unemployment and slumping living standards.
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