UK economy is doing better than expected
The UK economy performed better than previously thought in the second quarter, with households spending more and saving less due to the easing of foreclosure restrictions, official data showed on Thursday.
Gross domestic product in the three months to June rose 5.5%, up sharply from the previous estimate of 4.8%, the Office for National Statistics said in a statement that also cites accounting changes.
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The economy has slowed since then, however, with the Bank of England warning that the recovery is flattening due to fallout from the ongoing pandemic and bottlenecks in the global supply chain.
The outlook also darkens on Thursday with the end of the UK government’s costly leave program, which has kept millions of people in their jobs during the pandemic.
Consumers and businesses are also grappling with soaring gasoline prices and a chronic shortage of truck drivers that helped spark a fuel race last week.
“While upward revisions to GDP are clearly welcome, the second quarter is three months old and the recovery appears to have stagnated since then,” said Ruth Gregory, senior economist at research consultancy Capital Economics.
The main driver of the sharp upward revision in the second quarter was household spending.
The ONS also revealed that the economy shrank 1.4% in the first quarter.
This marked an improvement from the previous estimate of a 1.6% contraction.
“Today we released new revised GDP estimates, which include many improvements in sources and methods,” said Jonathan Athow, ONS statistician.
He noted that the latest data showed health services and the arts were performing better than previously thought.
“The revised figures show that households have saved less in recent years than previously thought,” Athow added.
“Household savings fell particularly sharply in the last quarter from record levels during the pandemic, as many people were once again able to spend on shopping, eating out and driving their cars.
The ONS said GDP was 3.3% lower than it was in the last quarter of 2019 before the pandemic hit.
This is compared to the previous figure of 4.4 percent. The strong second quarter recovery was fueled by consumer spending, as the government continued to provide massive financial support by paying the bulk of private sector wages.
But the economy has run out of steam since then, growing only 0.1% in July.
Commentators fear that the end of the holidays could trigger an increase in unemployment and a drop in living standards.
The UK government has spent nearly $ 70 billion ($ 96 billion, € 82 billion) to pay the bulk of the salaries of millions of employees trapped at home during the pandemic.