The Office for National Statistics (ONS)
has revised UK economic growth for Q2
2021 to 5.5% from an original estimate
of 4.8%. The UK’s level of GDP is now
3.3% below where it was pre-pandemic
in Q4 2019, revised from the previous
estimate of 4.4% below.
Other ONS data indicates a loss
of momentum more recently, with
the economy growing by 0.1% in July.
Although this represents a sixth successive
month of growth, the figure was
lower than June’s 1.4% rise and below
the 0.6% average forecast predicted in a
Reuters poll of economists.
July’s slowdown partly reflects an
upsurge in COVID cases and the resulting
‘pingdemic’, with ONS saying some
businesses complained of staff being
unable to attend work due to self-isolation
requirements. Additionally, analysts
said the slowdown highlighted the
impact of supply chain disruptions.
More recent survey data also shows
supply chain issues continue to weigh on
the recovery. The closely watched IHS
Markit/CIPS flash composite Purchasing
Managers’ Index (PMI), for instance, fell
from 54.8 in August to 54.1 in September.
While any reading above 50 does
still imply growth, this was a fourth
consecutive monthly decline, signalling
a loss of momentum across the UK
private sector.
IHS Markit’s Chief Business Economist
Chris Williamson said, “The survey also
points to business activity being increasingly
constrained by shortages of materials
and labour, most notably in the manufacturing
sector but also in some services
firms. A lack of staff and components
were especially widely cited as causing
falls in output within the food, drink and
vehicle manufacturing sectors.”

SFFS Economic Review_Sep 21

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.

As the country emerges from
lockdown, an increasing sense
of optimism seems to have
filled the air with a much more
familiar feel returning this
summer. And there’s plenty
to look forward to over the
coming months, with a host of
major sporting events including
the Olympics to excite and
enthral us, audiences returning
to theatres and concert halls
across the land, and the
rearranged Chelsea Flower
Show set to extend summer into
late September.
Faster recovery predicted
There also appears to be a similar air
of optimism in relation to economic
matters, with data across the first half
of this year proving to be stronger than
analysts had expected. As a result, there
now seems to be a good chance that
major economies on both sides of the
Atlantic will have recovered the lost
ground caused by the pandemic before
the end of 2021.
Global growth forecasts
upgraded
This has led to a string of renowned
international forecasting agencies
upgrading their global growth projections
during the past few months. The
UN’s mid-2021 World Economic Situation
and Prospects Report, for instance,
revealed an annual growth forecast of
5.4% for this year, up significantly from
January’s 4.7% estimate. This brighter
outlook largely reflects the rapid vaccine
rollout in a few large economies,
principally the US and China, as well as
an increase in global trade.
Diverging fortunes
UN economists, however, did warn that
inadequate availability of vaccines in
many countries was threatening a more
broad-based global recovery. The report
did strike a note of caution, suggesting
that, ‘the economic outlook for the countries
in South Asia, sub-Saharan Africa
and Latin America and the Caribbean
remains fragile and uncertain.’
Advice remains paramount
While the outlook has certainly improved
significantly across the first half of this
year, the UN forecast reinforces how the
pandemic continues to create a relatively
uncertain economic backdrop. This
inevitably means the provision of expert
advice is a vital component of investor
success. We can help you make the
most of any investment opportunities
that do arise.

Simply Biz Summer Update

The International Monetary Fund
(IMF) has sharply increased this year’s
growth forecast for the UK, although
recent data does suggest the country’s
strong economic rebound has begun to
slow down.
In its latest assessment of global
economic prospects, the IMF highlighted
a worrying divergence in fortunes
between rich and poor nations, due
to differing access to COVID vaccines.
Growth across all wealthy countries
in 2021 is now predicted to be half a
percentage point stronger than the IMF’s
previous forecast published in April,
but a similar-sized downgrade for other
nations means the overall global growth
forecast remains unchanged at 6%.
For the UK, the international soothsayer
is now predicting growth of 7% in
2021 which, together with the US, is the
joint-fastest rate among the G7 major
advanced economies. This represents
a sizeable upgrade from the previous
forecast, which the IMF attributed to
faster growth between February and
April, when the success of the vaccination
rollout and furlough scheme meant
that the UK economy performed better
than had been expected.
More recent data, however, does
suggest UK growth has slowed across
the past few months. The latest gross
domestic product figures released by the
Office for National Statistics (ONS), for
instance, showed the economy expanded
by 0.8% in May. While this was the fourth
successive month of growth, the figure
was significantly lower than April’s 2%
rate and below market expectations.
Furthermore, survey data suggests
the country’s economic rebound slowed
again last month, with the IHS Markit/
CIPS flash composite Purchasing Managers’
Index (PMI) dropping to 57.7 in
July from 62.2 in June. While any value
over 50 does still represent an acceleration
in output, the latest reading was the
lowest since March and suggests the
rising wave of coronavirus infections and
resulting ‘pingdemic’ has started to stifle
business activity.

=Simply Wealthy July 2021