MNI DATA IMPACT: UK GDP Rebound Ongoing, Still Below Feb Level

The UK recovery continued in July, albeit at a slower pace than seen in June, as the service sector fell short of expectations, despite the reopening of bars and restaurants at the start of the month, data released Friday by the Office for National Statistics showed.

GDP expanded by 6.6% in July, bang in line with City forecasts, decelerating from the unrevised 8.7% expansion seen last month. Output remains 12.6% below pre-pandemic levels, declining by 11.7% over the same month of 2019.

The service sector expanded by a less-than-expected 6.1%, leaving the category 12.6% below its February level, the biggest pre-pandemic shortfall of any of the output components. The much-heralded reopening of pubs and restaurants on July 4 did little to boost the wider economy. Takings at eating and drinking establishments rose by 99% between June and July, but the sector accounts for just 2% of GDP and made no material contribution to GDP growth.

Education provision jumped by 21% between June and July as some pupils returned to school, adding just under a percentage point to GDP growth. Healthcare increased by 4.4%, but National Statisticians noted the difficulty of measuring public services and warned of potential revisions in months to come.

Th wholesale and retail trading increased by 7.0% in July, extending a 27.0% surge in June, fuelled by the car business. Motor retail trade sits 6.6% above its February level, one of the few sectors to exceed its pre-pandemic height.

MANUFACTURING

The other output components outperformed expectations. Manufacturing rose by 6.3%, leaving the sector 8.7% below pre-pandemic levels. Production increased by 5.2%, adding 0.73 percentage points to total growth. Construction output surged by 17.6% in July, contributing nearly 1 percentage point to GDP growth. However, the sector remains 11.6% below pre-pandemic levels.

The Q2 headline trade surplus was revised lower, to GBP16.588 billion from the originally-reported GBP18.803 billion. However, the revision was largely due to accounting for non-monetary gold and is unlikely to have a material effect on later iterations of GDP. Net trade added 3.59 percentage points to GDP growth in Q2.

The trade surplus fell to GBP1.074 billion in July, from a downwardly-revised GBP3.902 billion in June. Excluding the volatile precious metals category, the trade surplus fell slightly to GBP1.220 billion from GBP 1.858 billion.