Danni Hewson, AJ Bell finance analyst, comments on today’s GDP and trade figures from the ONS.
• GDP up 2.3%, fastest growth since July 2020
• Growth slightly faster than expected and follows a 2.1% rise in March 2021
• GDP is still 3.7% below pre pandemic levels but 1.2% higher than initial recovery peak in Oct 2020
“At first glance there is a lot to be celebrated in the latest set of GDP figures. The UK economy is hurtling down the road to recovery at a rate of 2.3%, slightly faster than had been expected by economists and the fastest it’s travelled since last summer’s reopening boost. Crucially it’s also higher than the peak experienced in October last year demonstrating the resilience of business and the desire of consumers to embrace their newly re-found freedoms.
“Dig into the figures and it’s not a surprise to see the service sector playing a big part. With non-essential retail back in business, hairdressers brandishing scissors once again and the opportunity for all of us to enjoy a meal al-fresco and the boost was a decent 3.4%.
“But the feeling is the recovery is lumpy and delays in lifting restrictions could make it even more bumpy. The service sector is still far below it’s pre-pandemic levels and many in the hospitality sector are concerned about making it through the summer if social distancing continues to constrain sales. And the next few months will bring challenges as programmes like furlough begin to unravel and there have already been calls for the chancellor to consider extending the scheme into the autumn for sectors unable to get back to fighting strength.
“Yes, there is much to celebrate but there’s also a note of caution, we’ve been here before and we understand how fragile recovery can be and how quickly the pandemic can tilt the field.”
“The latest trade figures pose a number of questions but the biggest is - have our trading patterns changed forever following Brexit or are we just seeing the short-term effects of stockpiling and supply chain adjustments? What’s clear from the latest figures is that in April the UK was doing more trade with non-EU countries than with EU countries.
“The pandemic has almost certainly played a huge part. Lockdowns and travel restrictions have affected supply and demand, and this is always a picture full of moving parts. The restarting of car production in the UK undoubtedly played a big part with imports in metals like Palladium required for making catalytic converters up over the month.
“It will require time for reopening to work its way through and for those moving parts to settle before we can really quantify if change has come and gone or come and stayed.”
