LONDON (Reuters) – Britain’s economy grew more than previously thought during the April-June period before what appears to be a marked slowdown more recently as post-lockdown bottlenecks, including a shortage of truck drivers, piling up.
Gross domestic product rose 5.5% in the second quarter, the Office for National Statistics said, stronger than its preliminary growth estimate of 4.8%.
The ONS said the data had been adjusted to take into account more comprehensive data from the health sector as well as an update to its sources and methodology for calculating UK economic output.
The numbers provided a more complete picture of Britain’s rapid economic rebound after its coronavirus lockdown earlier this year, but there are now signs of a loss of momentum due to a shortage of supplies and staff as the global economy reopens.
“While upward revisions to GDP are clearly welcome, the second quarter is three months old and the recovery appears to have stalled since,” said Ruth Gregory, economist at Capital Economics.
“Even so, given that it is now believed that there is less spare capacity in the economy, which will only encourage the Bank of England to raise rates in the not too distant future.”
On Wednesday, BoE Governor Andrew Bailey said he believed the economy would return to pre-pandemic production levels in early 2022 – a month or two later than the BoE had forecast in August.
Despite the slowdown, the UK central bank has said it is heading for a first interest rate hike since the pandemic, as it expects inflation to exceed 4%.
Data from Thursday showed households increased spending by almost 8% in the April-June period and tapped into their coronavirus lockdown savings to fund it.
The savings rate, which measures households’ saved income as a proportion of their total disposable income, fell to 11.7% from 18.4% in the first quarter of 2020, the ONS said.
GDP growth was driven by the service sector, particularly in the accommodation and food service industry, where production grew 87.6% in quarterly terms when it reopened after the lockdown.
Manufacturing output rose 1.8% in the second quarter, despite a chip shortage that hurt auto production. Food and beverage manufacturing performed well.
The ONS said construction production has broadly returned to its pre-pandemic level.
The data also showed Britain’s current account deficit with the rest of the world held steady at £ 8.6 billion in the second quarter, equivalent to 1.5% of gross domestic product. In the first quarter, the shortfall was 1.6% of GDP.
Excluding volatile precious metals trade, the deficit widened to 1.8% of GDP from 0.2% in the first quarter, due to a deterioration in the UK trade balance and lower profits on investments foreigners.
Reporting by William Schomberg and Andy Bruce; Editing by Giles Elgood