Economy grows by 4.8% in second quarter as post-lockdown reopening drives spending spree
The UK economy grew by 4.8% in the second quarter of the year, according to official figures charting the fightback from the last lockdowns imposed on households and businesses to tackle the coronavirus crisis.
The data from the Office for National Statistics (ONS) had been expected to show a hit in the final month as June saw the start of disruption from workers being forced to self-isolate after being identified as close contacts by the NHS COVID app.
The spread of the Delta variant is likely to have dragged on July’s performance as Test and Trace figures have showed hundreds of thousands being ‘pinged’ on a weekly basis during the month.
The effects of the so-called ‘pingdemic’ are tipped by economists to have knocked output in July
But the ONS said growth in gross domestic product (GDP) in June alone came in at 1% – faster than the 0.6% recorded in May.
The second quarter figure of 4.8% was largely driven by the cautious reopening of the economy in the previous month as the final winter lockdowns eased.
It was aided, the report said, by the return of pupils to schools and a widespread leap in consumer spending as physical shops and pubs reopened their doors to customers outdoors.
Full interview with Chancellor
It marked a welcome recovery from the 1.5% contraction in output recorded between January and March.
ONS deputy national statistician for economic statistics, Jonathan Athow said: “The UK economy has continued to rebound strongly, with hospitality benefiting from the first full month of indoor dining, while spending on advertising was boosted by the reopening of many services.
“Health services also showed growth, with many more people visiting their GP.”
He added that GDP remained around two percentage points below its pre-pandemic peak.
Chancellor Rishi Sunak said of the performance: “Today’s figures show that our economy is on the mend showing strong signs of recovery, thanks to our Plan for Jobs and successful vaccine programme.
“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.
“With the fastest quarterly growth rate among the G7 economies we have exceeded expectations, and I’m pleased to see the UK bouncing back.”
BoE governor: Inflation issue will be ‘temporary’
But Liberal Democrat Treasury spokesperson, Christine Jardine, warned: “These figures shouldn’t lull us into thinking that all our problems are solved. We still face potentially massive obstacles if the Government goes ahead with ending the furlough scheme and the Universal credit uplift at the end of next month.
“Hard pressed families and struggling businesses need more reassurance than improving GDP figures – they need support extended into next year.”
The figure for June was better than economists had expected though the Bank of England had, just last week, forecast a second quarter spurt of 5%.
Policymakers will, likely, be heartened that a spike in inflation – now predicted by the Bank to hit a 10-year high later this year – does not appear to be damaging demand.
Bank governor Andrew Bailey believes the surge in price rises reflects the reopening of the economy and inflation will start to fall back next year but remain above its 2% target.
Many economists expect the pace of GDP growth to have eased from July – a prediction shared by financial market participants.
Steve Clayton, fund manager at HL Select, said: “With the big surge of the initial reopening behind us, we expect the pace of growth to moderate over the remainder of the year.
“But if businesses pick up the baton and start investing to support growth once more, then we could see upside to our already positive view of the prospects for the UK economy this year.”