The UK economy picked up momentum in August, according to official figures, but grew more slowly than expected after the spread of the delta variant of the coronavirus halted the recovery in July.
The gross domestic product rose by 0.4 percent in August compared to the previous month, according to initial estimates by the Office for National Statistics on Wednesday.
An initial estimate that the economy grew 0.1 percent in July was reduced to a 0.1 percent decline due to data revisions for the automotive and oil and gas sectors.
Sluggish growth in August reflected a return to summer activity, but economists warned the UK’s recovery could stall as the country struggled with rising living costs and supply shortages.
It lagged slightly behind economists’ growth forecasts, leaving production 0.8 percent below pre-pandemic levels, according to the ONS.
Paul Dales, UK chief economist at consulting firm Capital Economics, said the August improvements “likely had a lot to do with the lessening of reluctance from the ‘Pingdemic’ in July” when strict isolation requirements meant exposure to people with Covid at one point more than 1 million people have been isolated.
ONS figures showed that increased activity in the lodging and dining and arts and entertainment sectors fueled the recovery in August, while mining and quarries also grew rapidly.
For all consumer-facing services, production rose 1.2 percent but remained 4.7 percent below pre-pandemic levels.
Last month, officials revised their estimate of GDP growth for the second quarter upwards to 5.5 percent. But steadily rising coronavirus rates and a cost of living crisis that saw inflation soar to 3.2 percent in August have clouded expectations for the speed of the recovery.
Martin Beck, senior economic advisor for the EY Item Club, said August’s “more robust performance” was a welcome improvement, one that continues to be supported by a healthy labor market. However, he said the limited purchasing power and labor shortage would mean that growth would likely slow down over the next year.
The IMF warned Tuesday that the UK’s recovery from the coronavirus was likely to lag other countries and the economy would stay 3 percent below forecast levels through 2024. Other countries, she predicts, will revert to pre-pandemic growth.
Given the modest uptrend in August, economists said a slower short-term recovery could ease pressure on the Bank of England to hike interest rates to prevent higher inflation from entrenching the economy.
“All in all, we only expect Q4 GDP to grow 1.2 percent qoq, which would likely mean that the UK’s recovery was still less advanced than most other advanced economies, and this is it the monetary union should calm down. ”Policy Committee that it just needs to hike [the] Bank rate gradually over the next 12 months, ”said Samuel Tombs, UK chief economist at the consulting firm Pantheon Economics.
However, sterling rose slightly on the GDP data as traders calculated that despite the modest growth, the BoE would soon raise rates. In early Wednesday trading, the pound rose 0.3 percent to $ 1.3635.
