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The UK economy bounced back more than initially thought after the first coronavirus lockdown as shoppers returned to high streets and diners ate millions of state-subsidised restaurant meals.
Gross domestic product (GDP) jumped 16 per cent between July and September, the biggest quarterly increase on record and higher than the 15.5 per cent that had previously been estimated, official figures show. Consumer spending rose by almost 20 per cent while households reduced the amount they saved, on average, from a record high during lockdown.
However the strong third quarter was some way short of what was needed to recover from a record plunge in output between April and June when much of the economy had been shut down to control Covid-19.
GDP dropped by 18.8 per cent in the second quarter of 2020, revised down from earlier an estimate of 19.8 per cent.
The economy remained 8.6 per cent smaller in the third quarter than it was at the end of 2019.
Monthly figures suggest GDP grew just 0.4 per cent in October. A further contraction is expected in the final two months of the year as restrictions were tightened across the country with the prospect of further measures being introduced as a new, more transmissible variant of Covid-19 spreads.
So far, the UK is faring worse economically than any other G7 nation, having experienced a bigger hit followed by a slower recovery.
The differences between countries could be a reflection of how the virus spread, and how the lockdowns were implemented in the countries in question, the ONS said. It also said that some impacts may be measured differently in different countries.
“The economy saw a bigger bounceback in the third quarter than previously reported as it benefitted from reduced lockdown restrictions releasing pent-up demand,” said Howard Archer, chief economic advisor to the EY Item Club.
“It also gained some help from stimulus measures, including the temporary raising of the stamp duty threshold for house purchases, the VAT cut for the hospitality sector from mid-July, and the ‘Eat Out to Help Out’ scheme in August.”
Ruth Gregory, UK economist at Capital Economics, said the fact that many households still have high levels of savings built up during the pandemic could further aid the recovery.
“While a double-dip recession is a clear possibility if the tier 4 Covid-19 restrictions are extended into 2021, Q3’s high saving rate provides optimism that as long as vaccines are effective and widespread, GDP will stage a strong rebound in 2021,” Ms Gregory said.
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