- June delivered a decent 1% month-on-month (m/m) rise in GDP, an improvement on the previous month, despite the delay to the lifting of remaining COVID-19 restrictions. This left the economy 2.2% smaller than its pre-pandemic size.
- The disruption caused by people self-isolating may have caused some slowdown in growth in July. But with the COVID-19 situation looking better, the EY ITEM Club still thinks the economy is on course to grow by 7.6% this year.
Martin Beck, senior economic advisor to the EY ITEM Club, says:
“With the most important stages of the economy’s reopening passing in April and May and the easing of remaining COVID-19 restrictions delayed from the original date of 21 June, a slowdown in GDP growth in June wouldn’t have been surprising. But in practice, a 1% month-on-month rise in output was an advance on both May’s 0.6% growth – which was revised downwards – and the consensus forecast of 0.8% growth. GDP grew 4.8% in the second quarter, leaving the economy 2.2% below its immediate pre-pandemic size in February 2020.
“Looking at sectors, services expanded 1.5% month-on-month in June. This was aided by a rise in health output, as more people visited GPs, and a boost to the hospitality sector from the first full month of indoor dining since COVID-19 restrictions were eased. But industrial output fell 0.7% month-on-month, held back by the closure of oil fields for maintenance. And construction shrunk 1.3% month-on-month.
“The outlook for growth in the short term has become cloudier. Higher numbers of COVID-19 infections risk discouraging some people from social consumption, such as eating out. People being required to self-isolate following contact with an infected person could also hold back growth. But infections have recently fallen back from mid-July’s peak and guidance on isolation will become less restrictive from 16 August for the fully vaccinated. The risk of the recovery stalling therefore looks small and the EY ITEM Club continues to expect GDP to expand by an above-consensus 7.6% this year.”