Daily Management Review

Less Than Expected Growth In UK In August Amid Slowing Down Of Pandemic


The economy of the United Kingdom continued to recover from the novel coronavirus pandemic crisis, albeit at a slightly slower pace with the economy growing at 2.1% in August on a monthly basis.
According to the Office for National Statistics, the GDP growth rate for month of August was slower than expected with economists had expected the economy to expand at 4.6%. In July, the country’s economy had expanded by 6.4% while a 9.1% growth was reported in the previous month of June and 2.7% in May. UK economy had plunged by a record rate of 19.5% in he month of April.
The GDP for August remained 9.2% lower than the GDP in February just prior to the full impact of the pandemic was felt by the country, showed Friday’s data from the Office for National Statistics.
According to the ONS, with lockdown measures beginning to ease, the country noted a GDP growth of 8% in the three months to August.
In August, there was a 2.4% growth in the dominant services sector of the UK which was preceded with a 5.9% growth in the previous month of July. An almost 70% growth in the food and beverage services industry was the primary booster for growth in the services sector. According to the ONS, the growth in the food and beverage services industry was because of easing of restrictions and the “Eat Out to Help Out” scheme of the government.
Many sectors of the economy are, in recent months, seeing a glimmer of hope for recovery with the emergence of the country from lockdown. However in recent weeks, there has been an exponential growth in the number of Cvoid-19 cases in the country indicating a possible second wave of the pandemic.  
A 10 p.m. curfew for bars and restaurants across the UK has been imposed by the British government with more restrictions expected to be imposed in the coming weeks.
According to data compiled by Johns Hopkins University, the UK has confirmed 564,502 cases and 42,682 deaths as of Friday morning.
A new emergency package of measures to contain unemployment was announced by UK Finance Minister Rishi Sunak on September 24 which replaced the furlough scheme implemented earlier and which is set to expire this month.
“With recent surveys pointing to activity softening in September, and the potential for further and more stringent localized restrictions on activity, doubt is growing as to whether the recovery can be sustained into the final quarter of the year,” UBS Wealth Management Economist Dean Turner said Friday.
“Sluggish progress is likely to encourage the Bank of England to increase its bond buying program (QE) at its November meeting.”
The main lending rate has been reduced twice by the central bank since the onset of the pandemic from 0.75% to 0.1% and initiated an asset purchase program worth a total of £745 billion ($964.6 billion) in an effort to prop up the economy.
“While there are positive indications from the Bank of England of growth returning to pre pandemic levels before Christmas, this is far from a done deal,” said Tom Stevenson, investment director for personal investing at Fidelity International.
“The furlough scheme comes to an end this month and there is a real danger that fear of unemployment triggers a negative feedback loop of precautionary saving and dampens consumer confidence.”