August Economic Review

SFFS Economic Review_Aug 21


The latest gross domestic product
(GDP) figures showed that the UK
economy grew strongly in the second
quarter, although more recent survey
evidence does suggest the recovery is
losing momentum.
Data published by the Office for
National Statistics (ONS) revealed the
economy grew by 4.8% in the second
quarter of this year, fuelled by expansion
in the retail, restaurant and hotel sectors.
Despite this growth, the economy
remains 2.2% smaller than it was immediately
before the pandemic struck,
although analysts do expect it to return
to pre-COVID levels later this year.
Commenting on the figures, Chancellor
Rishi Sunak said, “The economy
is recovering very strongly, exceeding
many people’s expectations. But I’m not
complacent. The economy and our public
finances have experienced a significant
shock. It is going to take us time to
fully recover from that.”
GDP growth in the month of June
alone was estimated to be 1%, slightly
higher than the consensus forecast in a
Reuters poll of economists. More recent
survey evidence, however, suggests
growth may have slowed over the past
couple of months.
The closely watched IHS Markit/CIPS
flash composite Purchasing Managers’
Index, for instance, fell to 55.3 in August
from 59.2 in July. While any value above
50 does still represent growth, this was
the survey’s lowest reading since February,
with respondents widely reporting
constraints on business activity due to
staff shortages and supply chain issues
across both the manufacturing and
service sectors.
Data from two Confederation of
British Industry surveys also suggest
the recovery may be losing momentum.
The latest Industrial Trends Survey
found manufacturing output growth in
the three months to August eased from
the previous month’s record level, amid
the worst stock shortages on record,
while the Service Sector Survey showed
optimism among firms was ‘mixed’ in the
three months to August.