Economic growth slows as GDP moves closer to pre-pandemic levels
Figures from the Office for National Statistics (ONS) show that GDP growth was down from 5.5% in Q2 and just 0.6% short of its level in February 2020, before the pandemic struck. The level of quarterly GDP is now 2.1% below where it was before the pandemic at Q4 2019.
Revised estimates show that GDP fell in July by 0.2% and saw a modest pickup in August (0.2%). There was more of a rebound in September (0.6%), driven by services output growth (0.7%), as human health activities increased strongly.
In output terms, the largest contributors to the increase in GDP in Q3 were from hospitality, arts and recreation and health following the further easing of restrictions and reopening of the economy.
Ed Monk, associate director at Fidelity International, said: “The UK economy continues to grow but the pace of the recovery has slowed. The third quarter numbers cover the end of the summer when the economy was opening up – reflected in a 30% jump in accommodation and food services activity. Those effects are unlikely to be repeated, making the job of recovering the economy back to its pre-pandemic level difficult from here. GDP remains 2.1% below its level from the end of 2019 and we may be deep into 2022 before that level is seen again.
“All attention now turns to the crucial lead up to Christmas but it doesn’t look full of festive cheer. Large retailers are already warning on supply chain issues and consumers are facing steep price rises for everyday items, which aren’t expected to slow down anytime soon. A slowing recovery and increasing inflation is a troubling mix for policymakers in both Westminster and the Bank of England.”
Derrick Dunne, CEO of YOU Asset Management, said: “GDP grew by 1.3% during the third quarter. While somewhat below market expectations and certainly not the dramatic surge we saw in Q2, today’s numbers are still encouraging and are to be expected as the economy levelled out from the winter recovery.
“While we cannot escape the likelihood of bumps along the way, the quarterly figures are now just 2.1% below pre-pandemic levels so it’s clear we’re moving in the right direction.
“With the busiest shopping season just around the corner and prices expected to rise even further in its wake, consumers could soon shy away from more spending, taking the momentum out of the economic recovery. Whether the Bank of England will deem it necessary to pull the trigger on rising interest rates in this sort of environment – one of rising inflation and stagnating growth – remains to be seen.”