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GDP Q2 2021

UK GDP increased by 4.8% in Q2 2021 as restrictions eased, and is now 4.4% below its pre-pandemic level

Source: ONS

GDP

  • UK GDP increased by 4.8% quarter-on-quarter in Q2 2021 (April-June), as most businesses emerged from lockdown and consumers splashed out following the easing of Covid-19 restrictions.
  • The level of economic activity in the UK is now 4.4% below where it was prior to the pandemic at the end of 2019. 
  • On a month-on-month basis, GDP rose by 2.2% in April, 0.6% in May and 1.0% in June. Health services and a resurgence in hospitality were the main drivers of growth in June.

By Sector:

Services

  • The services sector continues to the main contributor to the economic recovery, expanding by 5.7% in Q2 2021, fuelled by the re-opening of retail and indoor hospitality. 
  • Within the services sector, accommodation and food services surged by 87.8% in Q2 2021, while wholesale and retail trade increased by 12.8% over the same period. 
  • Pent-up demand for socialising, warmer weather and Euro 2020 were all key growth drivers for retail and hospitality, as these consumer-facing industries grew by a combined 16.7% in Q2 2021. 
  • Services output is now 3.5% below Q4 2019 levels before the pandemic began, with travel and transport acting as the main drag on the service sector recovery. 
  • In June, activity in the services sector rose 1.5% month-on-month (MoM). Health made a strong contribution, as visits to GPs increased and the vaccine rollout continued apace. Hospitality also benefitted from its first full month of indoor dining since Covid-19 restrictions were eased. Food and beverage services grew 10.1% MoM in June.

Manufacturing

  • Manufacturing output rose by 1.8% in Q2 2021, driven mainly by increased production of food and beverages, and machinery and equipment. 
  • The production of motor vehicles fell by 16.7% in Q2 2021, its second consecutive quarterly fall, as a global semiconductor shortage affected the production of new cars. Output in the manufacture of motor vehicles remains 24.6% below its pre-pandemic level (Q4 2019).
  • In June, the manufacturing sector remained broadly flat, growing by 0.2% MoM. Eight out of the 13 manufacturing sub-sectors grew with the largest positive contribution coming from the manufacturing of transport equipment (+7.4%), which picked up following a weak May.

Construction

  • The Construction sector grew by 3.3% in Q2 2021, reflecting a quarter-on-quarter rise in new work (+3.7%) - most notably infrastructure projects - and repair and maintenance (+1.7%).
  • On a monthly basis, the Construction sector declined in April (-0.2%), May (-0.7%), and June (-1.3%), as firms reported limited availability of construction materials, including timber, steel, cement and tiles. However, output still rose on a quarterly basis, as construction activity was hit in Q1 2021 by the third national lockdown.
  • Construction output is close to returning to pre-pandemic levels, now at 0.6% below the level it was in Q4 2019

Household consumption 

  • Household consumption increased by 7.3% in Q2 2021, following a fall of 4.6% in the previous quarter. 
  • Spending on restaurants and hotels, and transport, all performed strongly with the reopening of the economy. This was partly offset by a fall in food and drink consumption expenditure, as in-store food sales were negatively affected in May as consumers preferred to dine out following the relaxation of hospitality restrictions. 
  • Compared to pre-pandemic levels, household consumption is now 7.0% lower than in Q4 2019.

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