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The UK economy is bouncing back from the Covid-19 pandemic much faster than previously estimated, according to new official data which shows Britain is no longer the worst-performing country in the Group of Seven.
The Office for National Statistics said on Friday that gross domestic product in the three months to June was 1.8% above pre-pandemic levels in the final three months of 2019. Previously, the statistical agency estimated that GDP in the second quarter of 2023 would be 0.2% lower than the fourth quarter of 2019.
Before the revision, the UK was the only G7 economy that had not returned to pre-pandemic levels. New data shows Britain is performing similarly to France, rebounding stronger than Germany, the euro zone’s largest economy, but its recovery remains weaker than elsewhere.
Most of the changes come from a sharp revision to the period to 2021 announced in early September, when the Office for National Statistics increased the size of the UK economy by almost 2%. There will be smaller changes in the first two quarters of 2022 and 2023.
UK Chancellor of the Exchequer Jeremy Hunt said: “We know that the UK economy will recover from the epidemic faster than anyone previously thought, and today’s data once again proves the doubters wrong.”
“The best way to sustain this growth is to stick to our plan to halve inflation this year,” he added.
Fiscal watchdog the Office for Budget Responsibility must take the ONS revisions into account when preparing forecasts for Hunter’s autumn statement on November 22.
However, economists point out that the UK’s performance is still quite poor compared with other major economies.
Ruth Gregory, an economist at consultancy Capital Economics, said the data “does not change the fact that the economy has lagged behind all other G7 countries except Germany and France since the start of the pandemic.” The big picture. That’s before the full drag of higher rates is felt.”
She predicts that rising interest rates (currently 5.25%) will trigger a mild recession, causing GDP to fall by 0.5% in the coming quarters.
“Given that statistical authorities in other countries are also revising their data, it may take some time for a stable situation to emerge,” said Samuel Toombs, an economist at Pantheon Macroeconomic Consulting.
GDP is currently estimated to grow by 4.3% in 2022, up from the previous forecast of 4.1%.
Growth between the first and second quarters of 2023 was forecast at an unrevised 0.2%, but the National Bureau of Statistics raised the first-quarter output expansion to 0.3% from a previous estimate of 0.1%.
Data on Friday also showed that household spending grew 0.5% in the second quarter of 2023, which some economists believe is a sign that the cost of living crisis is coming to an end.
Household disposable income rose 1.2% in the three months to June, helped by a recovery in real wages and higher benefit values given last year’s high inflation.
This helped lift the average share of household disposable income to 9.1% in the second quarter from 7.9% in the previous three months.
Martin Beck, chief economic adviser at the consulting firm EY ITEM Club, said that although the data shows that the economic recovery in 2021 is much stronger than previously expected, it largely confirms that the UK’s economic growth has been minimal over the past two years.
“Economic activity will be sluggish in the near term,” he said.
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