The British economy grew better than expected. Their gross domestic product (GDP) expanded despite a national coronavirus pandemic (Covid-19) lockdown and ongoing supply disruptions. The United Kingdom is also seeing a shortage of truck drivers.
- The British gross domestic product, according to the Office for National Statistics (ONS), expanded by 5.5 percent in the second quarter. The initial gross domestic product reading showed an expansion of 4.8 percent. The Office for National Statistics said the data had been adjusted to take in numbers from the health sector. Also there are “new sources and methodology for calculating British economic output,” the ONS said.
- The gross domestic product number signals a more complete picture of Britain’s economic recovery from the pandemic slump of 2020. Their economic recovery is showing signs of losing some steam due to a shortage supplies and staff. British businesses are having staffing issues as the economy reopens. On Wednesday, Bank of England (BOE) Governor Andrew Bailey said he thinks that “the economy would regain its pre-pandemic level of output in early 2022.” This is nearly two months slower than the Bank of England forecasted in August.
British Interest Rates to head Higher according to the BOE
- Despite Dr. Bailey’s comments, the Bank of England is moving ahead with their first rate since the coronavirus pandemic as inflation is moving above four percent. Thursday’s economic data showed households in Britain increasing spending by nearly eight percent in the second quarter. They were using Covid-19 lockdown savings to make purchases.
- The Office for National Statistics also showed that the British savings ratio, which is income households saved as a proportion of their total available disposable income, fell lower. This number fell from the first quarter reading of 18.4 percent to 11.7 percent in the second quarter. The rapid growth in Britain’s services sector help boost growth with the gross domestic product. Growth in the food industry sector saw output rising 87.6 percent during the quarter as the lockdown ended.
- Also, the ONS report showed manufacturing output gaining 1.8 percent in the second quarter. This comes in spite of a shortage of microchips hurting automobile production. Food and beverage manufacturing saw solid gains. The Office for National Statistics also reported that construction output was at its pre-coronavirus level.
- The country’s current account deficit was steady at 8.6 billion pounds and 1.5 percent of their gross domestic product. During the first quarter, their current account deficit was 1.6 percent of the GDP.