GDP Q2 2021 Quarterly National Accounts

UK GDP for Q2 2021 revised upwards to 5.5%, from initial estimate of 4.8%

Source: ONS

Headlines:

UK GDP increased by 5.5% quarter-on-quarter in Q2 2021 (April-June), revised up from the initial estimate of 4.8% growth.
The level of economic activity in the UK is now 3.3% below where it was prior to the pandemic at the end of 2019.
On a monthly basis, GDP rose by 2.8% in April, 0.6% in May and 1.4% in June. Health services and a resurgence in hospitality were the main drivers of growth.

GDP breakdown by sector

Services

The services sector expanded by 6.5% in Q2 2021 (revised up from initial estimate of 5.7%), fuelling by the re-opening of non-essential retail and hospitality, which coincided with warmer weather and Euro 2020.
Consumer-facing industries were the main contributor to growth in services, rising by an impressive 17.6% in Q2 2021. Within this, accommodation and food services surged by 87.6% in Q2 2021, while wholesale and retail trade increased by 13.1%.
Arts, entertainment and recreation, and other personal activities such as hairdressing, also saw a boost, rising 20.4% in Q2 2021 as restrictions on social contact eased.
Meanwhile, health and social work rose by 8.6% (a significant upward revision on the first estimate of 2.8%) and education output increased by 20.6% as schools re-opened.
Services output is now 2.2% below Q4 2019 levels before the pandemic began, with travel and transport acting as the main drag on the service sector recovery.

Production

Production output rose by 1.0% in Q2 2021 (revised up from the first estimate of 0.5%). Growth was mainly driven by an unrevised 1.8% rise in manufacturing, led 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 24.0% below its pre-pandemic level (Q4 2019)
Elsewhere in production, there was a contraction of 15.9% in mining and quarrying in Q2. This reflected the planned temporary closures for maintenance of oil field production sites throughout the quarter.
The production sector is now a revised 2.8% below its pre-pandemic level in Q4 2019, with manufacturing down 2.0%.

Construction

The Construction sector grew by 3.8% in Q2 2021 (up from the initial estimate of 3.3%). reflecting a quarter-on-quarter rise in new work (+3.7%) - most notably infrastructure projects - and repair and maintenance (+1.7%).
There was weaker growth in construction output across May and June as businesses reported limited availability of certain products, most notably timber, steel, cement and tiles. However, there was still a rise in construction activity in Q2 2021 compared with Q1 (Jan to Mar), because of a low base of construction output in the first quarter.
The Construction sector has now broadly recovered to its pre-pandemic level.

Household consumption

Household consumption increased by 7.2% in Q2 2021. This reflects the easing of COVID-19 restrictions, following a fall of 4.4% in the previous quarter. Household consumption is now 6.3% lower than pre-pandemic levels in Q4 2019.
The largest contributions in Q2 were from spending on restaurants and hotels, which performed strongly following reopening. This was partly offset by a fall in food and drink consumption, likely a result of people preferring to dine out and socialise outside of the home.
Feedback from retailers suggests that in-store food sales were negatively affected in Q2 by the relaxation of hospitality restrictions.
The strong rise in household spending saw the household saving ratio drop to 11.7% in Q2 2021, from 18.4% in Q1. However this is still significantly higher than pre-pandemic levels (see chart below)
Real household disposable income fell by 0.7% in Quarter 2 2021 despite no change in nominal household gross disposable income, as there was a quarterly rise in household inflation of 0.7%.