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The UK economy grew more slowly than expected before Omicron met

People look out over the financial district of the City of London from an observation deck in London, United Kingdom on October 22, 2021. REUTERS / Hannah McKay

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  • GDP + 1.1% in Q3 revised down from + 1.3%
  • Slowdown partly associated with fewer COVID vaccinations
  • Economists see a weaker Q4 in the Omicron effect
  • Current account deficit 4.2% GDP versus 2.3% in Q2

LONDON, December 22 (Reuters) – The UK economy grew more slowly than previously thought from July to September before the Omicron variant of the coronavirus posed another threat to the recovery later in the year, official data showed on Wednesday.

The gross domestic product of the world’s fifth largest economy rose 1.1% in the third quarter, weaker than a preliminary estimate of 1.3%, as global supply chain problems weighed on manufacturers and construction companies.

That was slower than the economic recovery of 5.4% in the second quarter when many coronavirus restrictions were lifted, the national statistics bureau said.

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Investors are poised for a further slowdown in the fourth quarter of 2021 and a sluggish start to 2022 due to a surge in Omicron-caused COVI9 cases that hit the UK hospitality and leisure sectors and retailers.

Prime Minister Boris Johnson ruled out new COVID restrictions in England before Christmas but said he may need to act on them. Scotland and Wales have tightened controls.

“While the economy is coping better with restrictions with each new wave, the possibility of tighter restrictions in January further cloud the outlook for GDP,” said Bethany Beckett, an economist at consultancy C -ital Economics.

The ONS said households were dipping into their lockdown savings to fund their spending. The savings rate fell to 8.6% of disposable income, after just under 11% in the second quarter.

Weaknesses in the healthcare sector, where testing and tracing and vaccination abated, and in hairdressers were partly behind the cut in the third quarter growth estimate.

A decline in energy production after a surge in demand during a cold spring in the second quarter also weighed on.

“But stronger data for 2020 means the economy was closer to pre-pandemic levels in the third quarter,” said Darren Morgan, director of economic statistics at ONS.

Last year’s slump in the UK economy was now estimated at 9.4%, revised from a 9.7% drop, and the ONS believed GDP in September was 1.5% below its end-2019 level, revised from the previous estimate of 2.1%. .

However, Britain’s progress in regaining its pre-pandemic economic size has lagged behind most other large, rich economies like France, Germany and the United States, adjusted for inflation, the ONS said.

Business investment declined 2.5% in the third quarter from the previous three months, nearly 12% below its pre-pandemic level.

The Bank of England is hoping for a revival in corporate investment to improve the UK’s longer-term growth prospects.

The UK’s balance of payments deficit widened to £ 24.4 billion (US $ 32.35 billion) as exports of goods fell, imports of goods rose and foreign companies received more income from their investments in the UK.

Economists polled by Reuters had expected a smaller deficit of £ 15.6 billion.

In relation to GDP, the deficit almost doubled from 2.3% in the second quarter to 4.2%.

($ 1 = 0.7542 pounds)

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Writing by William Schomberg, ad -tation by Andy Bruce, Kirsten Donovan

Our Standards: The Thomson Reuters Trust Principles.

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