UK Q2 GDP – Consumers Drive the Economy Ahead

UK Q2 GDP – Consumers Drive the Economy Ahead

UK GDP rose by 4.8% year on year in Q2, according to figures released today by the Office of National Statistics. The pattern of growth was erratic, with a 2.2% burst of growth in April slowing sharply to just 0.6% in May before accelerating once more to +1.0% in June. Fears that the arrival of the Delta variant and the “Pingdemic” that followed might impact growth have so far not really materialised. Overall, the figures were in line or slightly ahead of most forecasters’ expectations, but not quite matching the Bank of England’s 5.0% forecast made last week.

The pattern of growth was driven by the reopening of the economy after lockdown. Consumer expenditure jumped by 7.3%, more than offsetting the weakness of the previous two quarters. Businesses have yet to restart investing, with capital spending slipping back half a percent. Wage growth remains sluggish, despite many reports of hard to fill vacancies, with the ONS reporting employee compensation just 1.7% ahead.

Looking at the data, Steve Clayton, fund manager at HL Select said:

“These figures knock fears over the impact of the Delta variant on the head. Consumers are continuing to spend, regardless. The economy is still some 4.4% smaller than it was at the end of 2019, but is clawing that back with each month. With the big surge of the initial reopening behind us, we expect the pace of growth to moderate over the remainder of the year. But if businesses pick up the baton and start investing to support growth once more, then we could see upside to our already positive view of the prospects for the UK economy this year.”