Further to our previous article, the UK economy has continued its recovery from the Covid-19 pandemic, and the 3 national lockdowns, with new statistics showing that UK GDP increased by 1% in June 2021, and by 4.8% in the second quarter (April - June 2021).
UK GDP: Second Quarter
The latest monthly statistics from the Office for National Statistics (ONS) show that UK GDP increased by 1% in June 2021. This represents the 5th consecutive month of UK GDP growth. During the second quarter (April - June 2021) as a whole, UK GDP increased by 4.8%, the fastest rate of growth during the second quarter amongst all G7 nations.
The increase in GDP for June 2021 of 1%, is higher than the 0.8% increase recorded in May 2021. The figures for May 2021 were adversely impacted by the global microchip shortage.
Despite growth in UK GDP of 4.8% in the second quarter, the UK economy still remains 2.2% below its February 2020 pre-pandemic peak.
The continued recovery of the economy is being led by the recovery in the services sector, which grew by 1.5% in June 2021, and by 5.7% during the second quarter. Nevertheless, the services sector remains 2.1% below its pre-pandemic level.
Production fell by 0.7% in June 2021, but increased by 0.5% during the second quarter as a whole. The June fall was mainly caused by planned closures of oil fields for maintenance work. The production sector remains 3.2% below its pre-pandemic level
The manufacturing sector grew by 0.2% in June 2021, and by 1.8% during the second quarter. Nevertheless, it remains 2.3% below its pre-pandemic level.
Finally, construction fell by 1.3% in June 2021, but increased by 3.3% as a whole over the second quarter. The sector remains 0.3 below its pre-pandemic level. The June 2021 fall was mainly attributable to a decline in repair and maintenance work.
Unemployment Falls
With UK GDP increasing for the 5th consecutive month, unemployment fell 0.2% to 4.7% in the 3 months to June 2021, according to the ONS. At the same time, the number of payrolled employees increased by 182,000 to 28.9 million in July 2021. This represents the 8th consecutive monthly increase, but the level of payrolled employees remains 201,000 below the pre-pandemic level.
Consumer Spending
Continued UK GDP growth has led to an increase in consumer confidence in recent months, with spending on credit and debit cards increasing by 4% in the week to the 5th August 2021, to reach 99% of the level reached immediately prior to the pandemic in February 2020.
Nevertheless, whilst a report from Growth for Knowledge found that consumer confidence had plummeted to -34% during the final 2 weeks of March 2020 in the wake of the first Covid-19 national lockdown, the largest fall since records began in January 1974, by the 24th July 2020, the index had recovered to -27%. And a year on from that, the index has steadily climbed back up to just -7 in July 2021, but did fall back slightly to -8 in August 2021.
UK GPD Increase: Reaction
Reacting to the continued recovery of UK GDP, the deputy national statistician for economic statistics at the ONS, Jonathan Athow, stated: "The UK economy has continued to rebound strongly, with hospitality benefiting from the first full month of indoor dining."
The Chancellor of the Exchequer, Rishi Sunak, added: "Today’s figures show that our economy is on the mend, showing strong signs of recovery. 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."
However, the Chief Economist at KPMG, Yael Selfin, cautions that: "There are signs that ongoing issues with supply chains and staff shortages are slowing the pace of recovery, causing momentum to halt prematurely before the economy reaches pre-Covid levels. There is a growing risk that a slowing pace of output growth could coincide with even higher levels of consumer demand in the short term, leading to an unwelcome burst of inflation."
