Self-isolation nation: Recovery sluggish as GDP climbs 0.1 per cent in July
The UK economy grew just 0.1 per cent in July as the post-Covid recovery continued to slow.
New official figures released this morning showed a significant fall from June’s one per cent growth, with the economy still 2.1 per cent below its pre-pandemic peak in February 2020.
Chancellor of the Exchequer, Rishi Sunak remained positive about the economic outlook. He said, “our recovery is well underway thanks to the success of the vaccination rollout and the roadmap, with more employees on payrolls that at any point since last March.
“I am confident that – supported by our Plan for Jobs – we’ll continue to recover from the pandemic, we’ll see more new jobs, and we will Build Back Better,” he added.
July’s modest GDP growth was driven by an uptick in production output which climbed 1.2 per cent in a month and was boosted by the opening of an oil field which had been closed due to Covid. Arts and recreation activities saw a whopping nine per cent expansion as festivals, amusement parks and sports lured big spenders over Summer.
Pingdemic woes
Across the economy as a whole, however, the picture was patchy with analysts at Investec Economics dubbing Britain the “self isolation nation.”
“It is thought that labour supply shortages and self-isolation rules weighed on the data,” said analysts pointing out that at the peak of the pingdemic 680k notifications were sent in one week.
“Wider labour shortages stemming from the fall in overseas workers in the UK look set to dampen the economic outlook over at least the near-term,” the spokesperson added.
Output in consumer-facing services fell by 0.3 per cent in July 2021, its first drop since January 2021, while retail sales slumped by 2.1 per cent.
Construction was hit particularly hard, contracting for its fourth consecutive month with output down by 1.6 per cent in July 2021 and 1.8 per cent below its pre-pandemic level. New work was 3.2 per cent below the February 2020 level, equivalent to a loss of £285m.
GDP Outlook
Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, criticised the government’s recent decision to hike national insurance in light of slow economic growth. He said: “now is clearly a bad time to be ramping up the tax burden even further.”
Jessop urged government to encourage spending to boost growth. “Overall, the July GDP data were disappointing, but should only be a pause before a renewed acceleration,” he added.
While monthly economic growth was lacklustre the pound to dollar exchange rate peaked at 1.388 today, with the pound at its strongest level for a week, climbing 0.22 per cent in 24 hours.
The macro trend also remains positive with GDP up 3.6 per cent in the three months to July 2021.
Read more: Government borrowing smashes expectations but debt-to-GDP highest since 1960s