Busy GPs and Recovering Manufacturers May Avert the Start of Recession

Main points

• The normalisation of the economy after Covid-19 lockdowns continued to support growth in May, with GP appointments contributing positively, along with a recovery in manufacturing. It remains touch-and-go as to whether the economy contracted in the second quarter: the start of a recession if followed by a second contraction in the third quarter.
• Our final nowcast is for growth of 0.2 per cent in June, giving a fall of 0.2 per cent in the second quarter, though uncertainty remains and official data are subject to revision.
• Our first nowcast for the third quarter is for a contraction of 0.1 per cent, with growth likely to slow further as inflation drags on consumer demand.

“If April activity was more encouraging than the headline figure suggested – with strong consumer-facing services dragged down by the reduction in vaccinations – the opposite may be true of May. Headline growth of 0.5 per cent owed much to rising GP visits, while sectors like hospitality, retail and the arts all contracted, suggesting that rising prices may have eaten into discretionary household consumption. More encouragingly, manufacturing had its joint strongest month since November 2020, and construction recorded a seventh consecutive month of expansion. With plenty of room for revisions, it looks like touch and go as to whether or not the UK economy entered recession in the second quarter.”

Rory Macqueen
Principal Economist, NIESR

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