GDP First Quarterly Estimate, UK: July To September 2021

12th November 2021

UK gross domestic product (GDP) is estimated to have increased by 1.3% in Quarter 3 (Jul to Sept) 2021 following the continued easing of coronavirus (COVID-19) restrictions.

In output terms, the largest contributors to this increase were from hospitality, arts and recreation and health following the further easing of restrictions and reopening of the economy.

The level of quarterly GDP is now 2.1% below where it was before the coronavirus pandemic at Quarter 4 (Oct to Dec) 2019; we also published an article, which further examines the comparisons to pre-coronavirus pandemic levels between quarterly and monthly GDP estimates.

In Quarter 3 2021, household consumption made the largest contribution to expenditure; there was a fall in underlying inventories, likely reflecting some of the recent supply chain challenges, and a negative contribution from net trade.

UK gross domestic product (GDP) is estimated to have increased by 1.3% in Quarter 3 (Jul to Sept) 2021 (Figure 1). This follows the 5.5% increase in the previous quarter, where there was an easing in many of the coronavirus (COVID-19) restrictions. The level of real quarterly GDP in the UK is now 2.1% below where it was before the coronavirus pandemic at the end of 2019.

Monthly estimates published today show GDP improved across the three months in Quarter 3. Revised estimates show that GDP fell in July by 0.2% and saw a modest pickup in August (0.2%). There was more of a rebound in September (0.6%), driven by services output growth (0.7%), as human health activities increased strongly.

Several countries have published first estimates of real GDP for Quarter 3 2021. France and Italy had the largest increases in the third quarter of 2021, reflecting the reopening of the economies and easing of restrictions. However, these two countries have yet to recover to their pre-coronavirus pandemic levels of GDP. The United States is the only G7 economy to have recovered to above pre-coronavirus pandemic levels.

There was a rise in services output of 1.6% in Quarter 3 2021, having grown by 6.5% in Quarter 2 (Apr to June) 2021. Services output has almost recovered to pre-coronavirus pandemic levels and is now 0.7% below Quarter 4 (Oct to Dec) 2019 levels.

Accommodation and food services rose by 30% in Quarter 3 2021, while the arts, entertainment and recreation services increased by 19.6%, following the relaxation of almost all coronavirus public health restrictions on 19 July 2021, including the re-opening of indoor hospitality by varying degrees in England, Scotland and Wales. Consumer facing services output increased by 2.2% in Quarter 3 2021.

Human health activities increased by 3.5% in Quarter 3 2021, reflecting a large increase in GP face-to-face consultations and activities of other practice staff in clinics.

Administrative and support activities growth was driven by a pick up in travel agency, tour operator and other reservation service and related activities, though activity remains historically low.

Education output remained broadly similar with a rise of 0.4% in Quarter 3 2021, reflecting lower school attendances because of self-isolation. It remains 4.2% below pre-coronavirus pandemic levels.

The 2.5% fall in wholesale and retail trade output was driven by weak consumer spending. The retail sales index shows that sales volume fell across Quarter 3 2021, falling in July (-2.9%), August (-0.6%) and September (-0.2%). Automotive fuel sales volumes rose by 2.9% in September because of a spike in demand at the end of September, caused by concerns of fuel shortages. There was a slowdown in car sales, though, driven by microchip shortages and supply chain disruptions,

Comment
Sharp growth slowdown and hard winter ahead shows why policy must support the Covid recovery.

Responding to the latest ONS GDP figures today (Thursday), which show that the economy grew by 0.6 per cent in September, and by 1.3 per cent in the third quarter of 2021, leaving the UK with the largest shortfall in GDP relative to its pre-pandemic peak among G7 countries, James Smith, Research Director at the Resolution Foundation, said:

"Today's GDP data show that combined growth in July, August and September was no better than its pre-financial crisis average, leaving the UK economy furthest from its pre-pandemic level among G7 countries. This slowdown is taking place despite social distancing restrictions being removed in July, suggesting that supply-chain disruptions and shortages have derailed the recovery.

"The sharp growth slowdown and the prospect of a winter living-standards ‘crunch' providing a further headwind in the coming months mean that we are not out of the pandemic woods yet. That is why the Chancellor was right to provide more support for the economy at the Budget, and the Bank of England did not raise interest rates last week."

Note
the full ONS report can be seen at https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/latest