Britain's Economic Rebound: Faster and Stronger than Initially Estimated
Posted by Stelios on 8th Oct 2023
Revisions by the Office for National Statistics (ONS) revealed that the UK economy has rebounded faster than initially anticipated post-pandemic. The data shows that in the second quarter of 2023, the Gross Domestic Product (GDP) was 1.8% above pre-pandemic levels. This starkly contrasts the earlier ONS assessment, which believed the GDP was 0.2% below its pre-pandemic state.
Posted by: HM Treasury and The Rt Hon Jeremy Hunt MPPhotographer: Andrew Parsons, OGL 3, via Wikimedia Commons
These updated statistics position the UK's recovery ahead of European counterparts France and Germany. However, some economic experts remain sceptical about the longer-term prospects. Victoria Scholar, head of investment at Interactive Investor, commented, "It has been a shock turn of events that the narrative around the UK's sluggish post covid recovery has been completely flipped on its head because of statistical revisions."
Nevertheless, despite the promising GDP figures, the UK currency is facing its most challenging month in the past year since the mini-budget turmoil of 2022. Factors such as the growing demand for the dollar, increased interest rates, and a potential economic slowdown or recession on the horizon are causing concerns.
Breaking down the figures, the UK GDP grew by 0.2% from April to June 2023. The first quarter also saw a positive adjustment with the economy growing by 0.3%, a boost from the earlier 0.1% estimate. These growth figures largely stem from the production sector benefiting from falling input prices.
However, Sophie Lund-Yates, a lead equity analyst at Hargreaves Lansdown, remarked, "While momentum is overall positive, these levels of growth aren't exactly shooting the lights out."
Mdbeckwith, CC BY-SA 3.0, via Wikimedia Commons
The Chancellor, Jeremy Hunt, celebrated the data, stating, "We know that the British economy recovered faster from the pandemic than previously thought, and today's data once again proves the doubters wrong." He continued by emphasising the importance of sticking to plans to reduce inflation this year.
But not all share Hunt's optimism. Ruth Gregory, deputy chief UK Economist at Capital Economics, commented, "Overall, today's release changes very little. The data leaves the economy still only 0.6% above its level a year ago," highlighting the challenges ahead considering the influence of rising interest rates.
Further figures show that household spending increased by 0.5% in the second quarter of 2023, and disposable income grew by 1.2% in the same period. This was aided by real wages recovering and an uprating of benefits. The percentage of disposable income saved by households also rose to 9.1%.
Nevertheless, while the revised ONS figures indicate a stronger recovery in 2021, Martin Beck from EY ITEM Club emphasised that the UK has witnessed limited economic growth in the past two years and predicted a continuing "sluggishness" in the near future.
Sources:
ONS: UK economy recovered from pandemic faster than previously thought
UK economy makes stronger recovery from pandemic than first thought
UK economy grew faster than estimated since Covid
UK economy makes stronger recovery from pandemic than previously estimated
UK economy avoids stagnation with surprise growth
GDP quarterly national accounts, UK: April to June 2023