Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, comments on UK economic growth in August. However, Susannah Streeter warns that the economy cannot continue to rely on festivals to sustain growth.
Susannah Streeter comments:
“Festivals fans enjoying new found freedom in August and strong campsite bookings helped lifted economic output, with the arts entertainment and recreation sector growing by 9%.
But the economy can’t rely on happy campers to sustain growth, given the storm clouds that have gathered over supply chains since the summer.
It’s likely that the 0.4% growth in economic output overall in August was partly put due to the mini bounce back from the pingdemic which pushed a million people into self isolation in July. Weakness is seeping through these figures especially in the construction sector which shrank again for the fourth month in a row, by 0.2%. Widespread reports of raw material shortages is likely to have been partly to blame, as well as the difficulties of getting boots on the ground in building sites as sectors fight for skills, with 1.1 million vacancies opening up between July and September.
Output was still estimated to be 0.8% below pre-pandemic levels in August, and the price rises, fuel shortages and labour shortages are potholes in the road which are likely to have put a brake on growth in September.
It certainly won’t be an easy ride for Bank of England policy makers when they meet next to decide when to raise interest rates. Moving too sharply could see the economy go into reverse, but the Bank won’t want to risk losing credibility if prices keep accelerating.”