- The UK economic system grew in August after shrinking in July, however the growth undershot expectations.
- UK GDP grew 0.4% in August after a fall of 0.1% in July, leaving the economic system 0.8% smaller than earlier than COVID struck.
- Economists mentioned supply-chain issues and excessive power costs now pose issues to UK development.
The UK economic system expanded in August after shrinking barely in July, however development narrowly undershot expectations and analysts mentioned provide shortages would make the approaching months tough.
UK gross home product grew 0.4% in August after a revised 0.1% fall in July, the Workplace for Nationwide Statistics mentioned Wednesday. August’s studying was beneath expectations of 0.5% development.
Output within the all-important providers sector grew 0.3%, leaving it simply 0.6% smaller than in February 2020.
The August growth left general UK GDP 0.8% beneath the place it was in February final yr, the ONS mentioned. That is a a lot smaller hole than in July, after earlier months’ development figures had been revised upwards.
“The economic system picked up in August as bars, eating places and festivals benefited from the primary full month with out COVID-19 restrictions in England,” Darren Morgan, director for financial statistics on the ONS, mentioned.
Video: Greater power costs may drive central banks to react, IMF’s Adrian says (CNBC)
Market response to the information was muted, with the pound up 0.4% in opposition to the greenback to $1.364 and the FTSE 100 inventory index 0.26% decrease.
The UK economic system grew quickly within the second quarter, however development has slowed in latest months because the restoration has shifted right into a decrease gear. Rising delta variant coronavirus circumstances weighed on development in the summertime by forcing hundreds of individuals to self isolate.
Now, economists say the economic system faces extra hurdles within the type of provide chain disruptions and hovering power costs, which led to panic shopping for at gasoline stations in early October.
The Worldwide Financial Fund on Tuesday mentioned the UK’s restoration will lag behind that of the opposite G7 nations, as coronavirus and Brexit go away scars on the economic system. It mentioned UK GDP can be round 3% smaller in 2024 in comparison with the IMF’s forecasts within the fall of 2019.
Inflation has surged within the UK in latest months, and is predicted to high 4% by the top of the yr. The Financial institution of England is predicted to be the primary main central financial institution to boost rates of interest. However economists mentioned slowing UK development could drive BoE officers to rethink.
“We suspect shortages will probably be an even bigger drag on GDP in September and October – the petrol disaster most likely prevented some folks from attending to work,” Paul Dales, chief UK economist at Capital Economics, mentioned.
“So whereas the possibilities of a fee hike this yr have risen not too long ago, a weaker exercise outlook means it is not a performed deal.”