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Financial News: UK Economy Expands More Than Estimated In Q2

UK Economy Expands More Than Estimated In Q2

09/30/2021 - 02:45:00 (RTTNews)

(RTTNews) - The UK economy grew more than initially estimated in the second quarter on robust consumption, revised data from the Office for National Statistics showed on Thursday. Gross domestic product grew 5.5 percent sequentially instead of 4.8 percent growth estimated previously. The expansion has reversed first quarter's 1.4 percent contraction.

Consequently, the level of GDP was now 3.3 percent below where it was prior to the pandemic at the end of 2019, revised from the previous estimate of 4.4 percent.

Overall, while the upward revisions to GDP are clearly welcome, the second quarter was three months ago, and the recovery appears to have stagnated since, Ruth Gregory, an economist at Capital Economics, said.

"Even so, given that there is now thought to be less spare capacity in the economy that will only encourage the Bank of England to hike rates in the not too distant future," the economist noted.

The expenditure-side breakdown showed that household spending contributed the most in the second quarter. Household spending surged by revised 7.2 percent after falling 4.4 percent. The rate was revised down from +7.3 percent.

Government consumption climbed 8.1 percent, upwardly revised from a first estimate of 6.1 percent.

At the same time, gross fixed capital formation was up 0.8 percent, in contrast to the 3 percent decline a quarter ago. The rate was revised a 0.5 percent fall in the first estimate. This upward revision was mainly driven by business investment which increased 4.5 percent.

The trade balance was 0.1 percent of nominal GDP in the second quarter.

On the production-side, services, production, and construction output all increased in the second quarter as coronavirus restrictions continued to ease to varying degrees in England, Scotland and Wales.

There was an increase in services output of 6.5 percent in the second quarter, revised upwards from a first estimate of 5.7 percent.

Production output rose 1.0 percent mainly driven by an unrevised 1.8 percent rise in manufacturing. Construction output increased by a revised 3.8 percent and has now broadly recovered to its pre-pandemic output level.

Another report from the ONS showed that the UK's current account balance widened substantially in the second quarter as the deficit on both trade and investment income increased.

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