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Livesquawk - UK GDP Inches Towards Pre-Pandemic Highs, But Are We Losing Gas?
UK GDP Inches Towards Pre-Pandemic Highs, But Are We Losing Gas?

     - UK economy edges towards pre-pandemic levels

     - Growth potentially stalling post “lockdown euphoria”

     - Uncertainty ahead as consumer spending rises

 

By Mack Foley

LiveSquawk News

@MrSockoMF

 

13 October 2021|10:35 GMT

 

London – UK economic growth continued in August but fell short of a rebound to the pre-pandemic level of February 2020, remaining just 0.8% lower, month on month.

 

The Office for National Statistics said GDP grew an estimated 0.4% on the month, missing the consensus forecast of 0.5% but still accelerating from last month’s revised 0.1%. This revision, according to the ONS, was driven downward by updated data for cars, oil, gas and improvements to how economic health is measured.

 

Focusing on GDP service sector contributors, accommodation and food services continued to underpin activity in August as the public flocked to restaurants, bars and festivals for the first full month without Covid-19 restrictions in Britain. Health and social services held the median figure back the most due to fewer visits to doctors. Furthermore, consumer-facing services increased 1.2% in August but remained 4.7% below pre-pandemic levels.

 

UK production followed a similar narrative, shrinking to 0.8% month on month from 1.2% but remaining above the forecast of 0.2%. Output in this sector was also below its respective February 2020 level by 1.3%.

 

Despite slightly softer overall readings, cable remained steady. However, MUFG’s Lee Hardman said this “looks more like USD weakness driving cable higher than anything pound specific”.

 

Euphoria wanes?

Britain's economy boomed back in the first half of 2021 as a result of easing lockdown restrictions and initial vaccinations, but recently economic expansion has begun to slow. The perfect storm seems to be brewing with intensifying supply chain bottlenecks, rising energy prices and talk of tax hikes

 

Analyst James Smith at ING also pointed out that the UK economy weathered the Delta variant outbreak well, but one cannot deny the gradual deceleration in economic growth. He noted that thoughts are that “the Bank of England will wait until 2022 before hiking – but perhaps more importantly – it implies markets may be wrong to price interest rates at 1% or higher in the next few years.”