Economy inches towards recovery in August

14 Oct 21

The economy is back on its path to recovery as GDP is estimated to have grown by 0.4% in August 2021 – the first full month without any coronavirus-related restrictions – data from the Office for National Statistics shows.

The positive growth follows a contraction in GDP by 0.1% in July, although the economy remains 0.8% below its pre-pandemic level in February 2020.

August growth was spurred on by the accommodation sector, which grew by 22.9%, while arts, entertainment and recreation grew by 8.5%.

Offsetting the recovery were human health and social work activities and retail trade, which fell by 4% and 1.9% respectively.

The International Monetary Fund recently predicted the UK economy would grow by 6.8% in 2021, following a fall of 9.8% in 2020.

Julian Jessop, economics fellow at the free market think tank Institute of Economic Affairs, said:

“The rebound in economic activity will help to repair the public finances without the need for any more tax increases, but also makes it increasingly hard to justify keeping interest rates at the emergency low of 0.1 per cent.”

James Smith, research director at the Resolution Foundation, said the economy is about 4% stronger than the Office for Budget Responsibility had predicted in March 2021.

He said this will be “very welcome news for the Chancellor”, but warned it would be risky to assume the recovery is complete.

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