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Revised GDP figures show UK economy bounced back from pandemic faster than expected

Paloma Kubiak
Written By:
Paloma Kubiak
Posted:
Updated:
29/09/2023

UK Gross Domestic Product (GDP) has been revised upward in Q1 2023 but remains the same for Q2. However, with all revisions, it means economic growth is 1.8% above pre-pandemic levels.

Gross Domestic Product (GDP) measures the value of goods and services produced in the UK. It estimates the size of – and growth in – the economy.

According to the Office for National Statistics (ONS), UK GDP is estimated to have increased by an unrevised 0.2% in the three months to June 2023.

In terms of output, this was driven by a 1.2% increase in the production sector, while the ONS noted increases in nine out of 13 sub-sectors which reflected falling input prices and helped “relieve some pressure on manufacturers”.

For individuals, the ONS revealed real households’ disposable income grew 1.2%, while the household saving ratio grew by 9.1%. This is up from 7.9% in Q1 2021, with income growing more than expenditure.

While the Q2 GDP estimate is unchanged, the ONS noted that its previous quarter (January to March) estimate has been revised upward from 0.1% to 0.3%.

And UK GDP is now estimated to have increased by 4.3% in 2022, revised from a first estimate of 4.1%.

Taking into account all of its recent revisions, the ONS said this means that GDP is now estimated to be 1.8% above pre-coronavirus (Covid-19) pandemic levels in Q2 (April to June) 2023.

GDP growth but mild recession looms

According to Ruth Gregory, deputy chief UK Economist at Capital Economics, this takes the UK above France in the G7 rankings after having leapfrogged Germany when revisions up to Q4 2021 were released a few weeks ago.

Gregory added that today’s data “leaves the economy still only 0.6% above its level a year ago”.

“It does not change the big picture that the economy has lagged behind all other G7 countries aside from Germany and France since the pandemic. And that’s before the full drag from higher interest rates has been felt.

“The final Q2 2023 GDP data release shows that the economy was a bit more resilient in the first half of this year than we previously thought. But other indicators suggest this is now fading. We still think that higher interest rates will trigger a mild recession involving a 0.5% fall in GDP in the coming quarters”, she said.

Russ Mould, investment director at AJ Bell, said: “While the UK economy bounced back from the pandemic at a faster rate than previously expected, it is important to remember these figures are backwards looking. The market is more interested about what might happen next.

“The economy is expected to be sluggish going into 2024, particularly if inflation remains sticky and interest rates stay higher for longer. However, markets have been worried about a recession so positive revisions to GDP estimates, even small ones, give hope that we could avoid the economy going into a big downturn.”