Economy grows & inflation slows…

The Office for National Statistics (ONS) has released updated information around both the state of the economy and inflation.

Economic Growth

The UK’s gross domestic product (GDP) is estimated to have increased by 4.8% between April and June 2021. This was as trading restrictions were eased as part of the Government’s Roadmap out of Lockdown restrictions.

The same report also shows that GDP increased across all three months in Q2 2021 at 2.2% in April, 0.6% in May and 1% in June 2021.

The level of GDP in the UK is now thought to be 4.4% below the pre-pandemic level at the end of 2019.

The largest growth in Q2, of 87.8% was seen in Hospitality, followed by the wholesale and retail sector, which increased by 12.8%.

Jonathan Athow, national statistician for economic statistics at the ONS, said: ‘The UK economy has continued to rebound strongly, with hospitality benefitting from the first full month of indoor dining, while spending on advertising was boosted by the reopening of many services.”

The ONS also credited the re-opening of non-essential retail, and the Euro 2020 Football Championship for the economic recovery in the services sector. The reopening of schools also saw education output increase by 19.4%.

Production output rose by 0.5% in Q2 2021 following a fall of 0.5% in the previous quarter, but remains 3.3% below its pre-pandemic level.

Inflation Slows

The ONS has also released figures for inflation that shows that the UK Inflation rate fell to 2.1% in the 12 months to July. This is lower than previously forecast.

This is a reduction from the 2.4% that was reported for the 12 months to June, which was the highest level for nearly three years, and is now just above the Bank of England’s 2% target.

The largest contribution to the reduction between June and July 2021 came from clothing and footwear, as well as recreational goods and services. This reduction was partially offset by price increases from second hand cars.

Whilst the reduction may dampen fears of soaring inflation, economists are still wary that inflation will rise later this year. This would be in keeping with the Bank of England’s expectations.