Press Release: NIESR Monthly GDP Tracker – Reopening bounce slows as Delta hits

Main points

• Growth of only 0.1 per cent in July was the lowest since January. The weaker than expected outcome resulted from the end of the spring re-opening boom at the same time as the Delta variant hit labour supply and consumer confidence.
• We forecast growth to pick up in August, thanks to the domestic tourism and hospitality industries, and forecast month-on-month growth of 0.7 per cent.
• With expected growth of 0.8 per cent in September this would lead to growth of 1.6 per cent in the third quarter overall. The return of many office workers, particularly in London, should boost both the transport and hospitality sectors.
• A steady recovery in the rest of the year is likely to be driven by ‘catching up’ in the hospitality, transport and arts sectors. However, there are notable downside risks to such a consumption-led recovery, including the re-emergence of Covid-19 and the response of household and business spending to the end of the furlough scheme and the planned reduction in Universal Credit.
• As of July 2021, UK monthly GDP remains 2.1 per cent below its pre-pandemic level (February 2021). NIESR’s Summer UK Economic Outlook forecast quarterly output to return to its pre-Covid level (2019 fourth quarter) in the first quarter of 2021. 

Rory Macqueen, Principal Economist – Macroeconomic Modelling and Forecasting, said: “GDP growth of under 0.1 per cent in July would have been negative had it not been for the reopening of an oil field previously closed for temporary maintenance. There was also relatively good news for the arts and recreation sector, thanks to the lifting of restrictions on 19th July, but clearly the boost to GDP from reopening had slowed by the summer. The Delta variant and supply issues – some but not all of which are linked to Covid-19 – have also provided headwinds to growth in the third quarter but there remains potential for ‘catch-up’ in transport, hospitality and arts, which remained between 7 and 19 per cent below their February 2020 levels.”

Please find the full analysis following this link here.

ENDS