Bank of England cuts forecast for GDP on labour shortages
The UK economy recovered quicker than expected through April and June as Brits splashed the cash after they were released from lockdowns.
The Office for National Statistics said that GDP rose by 5.5% in Q2 after initial forecasts suggested it would come in at 4.8%.
The surge in GDP was supported by shops reopening with households spending playing a significant role in the 5.5% increase.
Jonathan Athow, deputy national statistician at the ONS, explained the new figures, saying: “The economy grew more in the second quarter than previously estimated, with the latest data showing health services and the arts performing better than initially thought.”
“The revised figures also show households have been saving less in recent years than previously thought.”
“Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars.”
In Q2, household spending rose by 7.9%, as the savings ration dropped to 11.7% from 18.4% over the first three months of the year.
However, ongoing supply chain issues, including a shortage of HGV drivers, led to the Bank of England cutting its GDP forecast from 2.9% to 2.1%.
Fidelity International’s investment director, Maike Currie, said that “no-one really knows what is next”. He added: “I think what we can be certain of is that we’ll see under-employment, where employees return to work but possibly not on a full-time basis and that they might need to supplement their income.”