MNI DATA IMPACT: UK Nov GDP Declines Amid Second Lockdown

The UK economy contracted in November as the second lockdown in England came into force. Tighter restrictions weighed particularly on the service sector with pubs, restaurants and hairdressers seeing the largest impact on business. However, GDP outperformed expectations looking for a bigger drop.

GDP contracted by 2.6% in November, the first monthly decline since April, but sill managed to exceed expectations as manufacturing and construction held up well and schools remained open, limiting the impact of the restrictions on the economy compared to the first lockdown. Nevertheless, output remains 8.5% below the pre-pandemic level. December would need to record a 0.9% drop to yield a flat reading in Q4. Annual output decreased by 8.9%, marking the largest decline since July.

The service sector was the main driver of November's decline, falling by 3.4%, although coming in stronger than markets expected. Services output remains 9.9% below February's pre-pandemic level. The decrease was led by a sharp drop in accommodation and food services as pubs and restaurants had to close again. Nevertheless, the ONS noted that many businesses adjusted to the new working conditions and extended their click and collect services as well as their online sales channels.

While industrial output ticked down 0.1% in November, manufacturing output rose 0.7%. However, both indicators came in below expectations. Industrial as well as manufacturing output remain 4.7% and 0.9%, respectively, below their pre-crisis levels. Construction output rose 1.9%, exceeding expectations. The automotive sector, housebuilding and infrastructure increased in November and all of them are now above their pre-pandemic levels.

Excluding non-monetary gold and other precious metals, the total trade deficit widened in November to GBP 1.472bn as imports rose GBP 2.4bn (4.9%), while exports increased GBP 1.9bn (3.9%). The expansion of the total trade deficit was led by an increase in the trade in goods deficit.