After shrinking by 1.4% in the first three months of the year, the UK economy grew by a record 5.5% in the second quarter (April-June 2021) as restrictions on business activity were eased.
ONS figures said that the Q1 contraction was less than the 1.6% expected, with Q2 growth better than the predicted 4.8%.
Although this still left GDP 3.3% down on pre-pandemic figures in 2019, the UK’s performance was broadly similar to the situation in other European countries, reports the Guardian.
Spending savings
Jonathan Athow, the deputy national statistician for economic statistics, said households have been saving less and spending more. “Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars,” Athow said.
Export growth in the second quarter was revised up from 3% to 6.2% while imports were revised down from 6.5% to 2.4%.
Export highlights
According to the ONS, the increase was driven by a rise of 13.4% in exports of goods such as chemicals, machinery and transport equipment, and material manufactures. However, exports of services fell by 1.8%.
Trade contributed 1.0% to the UK’s growth in the second quarter rather than -0.7% as originally thought.
Auto exports
There was less good news for UK car exports, which have “collapsed” as UK factory output has slumped in recent weeks to 1950s levels, the Times reports.
Latest figures show around 1,000 cars a day have been built in Britain compared with 4,500 a day recently. Industry data showed a 27% year-on-year drop in production in August down to 37,000.
While domestic consumption has stayed stable, exports have fallen by 32% according to the SMMT. Sales to America are down by 65% and to China by 58%. Australian buyers were down by 75%.
Business confidence has “fallen off a cliff” dropping to its lowest since February, according to the Institute of Directors (IoD), reports the Guardian.
Confidence hit
Kitty Ussher, the IoD’s chief economist, said the business environment has deteriorated dramatically in recent weeks with confidence down from +22 to -1 in September.
“Following a period of optimism in the early summer, people running small and medium-sized businesses across the UK are now far less certain about the overall economic situation and the IoD Directors’ Economic Confidence Index fell off a cliff in September,” she said.
Ussher added that a higher proportion of IoD expect costs to rise in the next year than expect revenues to rise.