Danni Hewson, AJ Bell financial analyst, comments on August’s GDP figures GDP monthly estimate, UK - Office for National Statistics (ons.gov.uk)
“Remember that August feeling? Masks were gradually disappearing from shops and restaurants. Phones had stopped pinging with a requirement to ditch work and hole up for frustrating days on end and petrol stations were blissfully unencumbered. This was Britain in full on recovery mode but even then, the recovery wasn’t quite as punchy as many economists had been expecting and then there’s the downward revision of July’s number which now more accurately represents the constraints many businesses were shouting about.
“Is this a glass half full moment? It’s hard to be cheery about where the economy was when households and businesses are facing an agonising winter, but there are real bright spots when you dig into the numbers. Firstly, the economy is clawing its way back to pre-pandemic levels and is less than one percent below where it was in February 2020. Then there’s the service sector, bars and restaurants, art galleries, travel agents, all enjoying their moment in the sun as consumers rushed out to enjoy life in all its glories. Yes, retail suffered by comparison, but who wants to shop when you can experience, and people often put off purchases in the summer with half an eye on what will nestle under the Christmas tree.
“But even in August those supply issues were really beginning to take a toll on the construction sector which took another tumble and is now solidly below where it was pre-pandemic. Steel, concrete, timber just a few of the crucial commodities that were difficult to source and came with a much bigger price tag. Looking at the trajectory of this sector does hint at what next month’s figures might show for other sectors.
“Every bit of data is useful and will be pored over by the Treasury ahead of the upcoming budget and by the Bank of England which is having to consider its next step very carefully. August might have delivered growth, but the next few months will be dragged down by supply issues, price hikes and a knock to overall confidence.”