Following a rebound from the reopening of the economy and government support measures, the UK economic growth moderated notably in August suggesting that growth momentum is losing steam.
Gross domestic product climbed 2.1 percent month-on-month, slower than the 6.4 percent expansion seen in July, the Office for National Statistics reported Friday. Economists had forecast a monthly growth of 4.6 percent.
This was the fourth consecutive monthly increase following a record fall of 19.5 percent in April.
August GDP was 21.7 percent higher than its April low. Nonetheless, it remained 9.2 percent below the levels seen in February 2020.
In the three months to August, GDP grew 8 percent, following two consecutive quarterly falls. This was slightly slower than economists’ expectation of 8.2 percent.
On the production side, the service sector output growth slowed to 2.4 percent in August from 5.9 percent in July.
Driven by government’s Eat Out to Help Out Scheme, accommodation and food services logged a sharp growth of 71.4 percent contributing 1.25 percentage points to growth.
Growth in industrial output eased to 0.3 percent from 5.2 percent. Manufacturing output gained 0.7 percent versus a 6.9 percent growth in July.
At the same time, the construction output growth logged a marked slowdown, to 3 percent from 17.2 percent a month ago.
Year-on-year, industrial production decreased 6.4 percent and manufacturing slid 8.4 percent in August.
BCC Head of Economics Suren Thiru said although the economy remains on course to exit recession in the third quarter, the looming triple threat of surging unemployment, further restrictions and a disorderly end to the transition period means the recent rally in economic output is likely to be short-lived.
Ruth Gregory, an economist at Capital Economics, expects the new Covid-19 restrictions to mean that the economy does little more than move sideways in the final three months of the year, leaving economic activity marooned 7.5 percent short of its pre-crisis level.
The Bank of England will yet expand quantitative easing by a further GBP 250 billion by the end of next year, with the next tranche of GBP 100 billion coming this November, the economist said.
Later today, Chancellor Rishi Sunak is set to announce details of a new local furlough scheme for those businesses which are closed due to the local lockdowns.
Another report from ONS showed that the visible trade deficit widened to GBP 9.01 billion from GBP 7.86 billion in July as exports grew only 0.4 percent on month, while imports climbed 3.7 percent.
The overall trade surplus totaled GBP 1.36 billion in August versus a GBP 1.68 billion surplus a month ago.
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