UK economy posts record growth, but slows in September – as it happened

Graeme Wearden

from on 2020-11-12 16:46 (#5A96C)

Britain's economy returned to growth in the third quarter, but September slowdown worries economists

Latest: Experts fear economy will shrink in Q4
Sunak: We'd consider more interventions
UK suffers worse Covid-19 slump than US, France or Germany
UK GDP grew 15.5% in last quarter
Record growth, after worst slump ever, but still 9.7% smaller than pre-Covid
Growth slowed to 1.1% in September
Introduction: It's UK GDP Day

4.45pm GMT

Right, time to wrap up.

Growth across the UK economy has faded after a record recovery over the summer, raising fears of a renewed contraction in the last three months of the year.

The return of children to school boosted activity in the education sector. Housebuilding also continued to recover, while business strengthened for lawyers and accountants after a poor August.

However, pubs and restaurants saw less business, after the eat out to help out' scheme ended, and accommodation saw less business after a successful summer."

The *level* of GDP is still at 2014 levels, and is still 8.3% down on its February level.

To be clear, this still a massive, massive recession and with gains harder to come by in the near term - the worry is this leads to v.high unemployment. pic.twitter.com/J1ilIxZ4nL

Services, construction and manufacturing are all between 6-12% below the level they entered this year at....

The fresh lockdown we are currently enduring has raised the risk of a double -dip recession through the beginning of 2021; the UK had started to build momentum but that looks to have dissipated now."

We want to make sure that we get the economy going strongly coming out of this. We want to make sure we support employment, support people going in to jobs.

We want to help the people who sadly lost their jobs to find new ones. We want to get consumers spending again, people out and about. So we'll look at a range of things to see what the right interventions are at that time

European Closing Prices:#FTSE 6338.94 -0.68%#DAX 13052.95 -1.24%#CAC 5362.57 -1.52%#AEX 600.05 +0.14%#MIB 20817.73 -0.83%#IBEX 7726 -0.87%#OMX 1892.407 -0.55%#STOXX 3434.49 -0.95% https://t.co/xoLxs1NiIJ

4.19pm GMT

Financially hard-hit US households have knocked 56m from National Grid's underlying profits for the first half of the year as the company counts the cost of Covid-19.

The energy firm, which is also a supplier in the US, said the pandemic wiped a total of 117m from its underlying profits compared with last year. The crisis had lowered revenues, raised costs and left more homes unable to pay their bills, it added.

4.08pm GMT

Earlier today, the Bank of England governor cautiously welcomed the encouraging vaccine trial news from Pfizer and BioNTech this week.

Andrew Bailey said it was very encouraging' , and could lesson the economic damage caused by the pandemic.

Speaking at the Financial Times' Global Boardroom event, the BoE governor said recent news on the efficacy of the vaccine being developed by Pfizer and BioNTech was consistent with the BoE's assumption that there would be a gradual and progressive improvement in [economic] conditions that would reflect a gradual advance of treatments".

The news is encouraging," he said, but added: I think we have to be cautious because there's still quite a way to go in trialling [a vaccine], in production and distribution, and putting all this into action."

BoE governor says vaccine advance is very encouraging' for UK economy https://t.co/RHii9S0KDL

3.41pm GMT

Back in the UK, high street and travel hub retailer WH Smith is set to close 25 high street stores, affecting nearly 200 jobs, after the coronavirus pandemic pushed the retailer 280m into the red.

The books to paperclips chain said it was likely to permanently close the stores, which are mainly smaller outlets, after sales in its high street business fell 19%.

3.25pm GMT

In New York, tech stocks are on the rise while other stocks dip back.

Infection numbers and hospitalizations keep rising in the United States, leading states like New York to reintroduce soft curfews targeting bars and restaurants.

One of president-elect Biden's covid advisors called for a 4-6 week nationwide shutdown to bring the outbreak back under control, which investors may have interpreted as a taste of what is to come. In other words, it is great that a vaccine is now on the horizon, but markets seem to be absorbing the fact that we won't get there for several more months and the world economy could remain under severe duress in the meantime.

2.03pm GMT

Meanwhile in America, the number of people filing jobless claims has hit a seven-month low, but remains painfully high as the pandemic rages.

Around 703,000 new initial claims' for unemployment benefit were filed last week (or Election Night in America Continued" week).

BREAKING: 1 million Americans filed *new* unemployment claims last week, down slightly from prior week.

Over 21 million Americans are currently receiving unemployment aid.

Bottom line: 8 months into this and there's still a lot of pain and layoffs. pic.twitter.com/afMtWSOMAq

Another more than 1.0 million people applied for UI last week, including 709,000 people who applied for regular state UI and 298,000 who applied for Pandemic Unemployment Assistance (PUA). PUA expires in just over six weeks. 1/ https://t.co/tg071kRKs8

Last week was the 34th straight week total initial claims were far greater than the worst week of the Great Recession (GR). If you restrict to regular state claims (b/c we didn't have PUA in the GR), initial claims are still more than 3 times where they were a year ago. 3/

For now, after an individual exhausts regular state benefits, they can move onto Pandemic Emergency Unemployment Compensation (PEUC), which is an additional 13 weeks of regular state UI. But PEUC expires in just over six weeks. 5/

1.38pm GMT

NIESR, the economic thinktank, has crunched today's GDP report...and concluded that the UK economy will shrink around 2.2% in the last quarter of the year.

They estimate that growth will drop to a meagre 0.3 per cent in October, and then plunge by 12% in November, before rebounding in December if the current lockdown ends.

Our forecasts assume a return to October levels of activity in December: in other words, we expect a rapid rebound following the end of the second lockdown. Accordingly, our forecast for 2020 stand at -11.3 percent.

Today's ONS data suggest that the recovery from the first phase of the pandemic was already slowing by the end of the third quarter, with output remaining 8.2 per cent below pre-pandemic levels in September. Growth in the fourth quarter will be much slower than in the third quarter and is likely to turn negative, due to weaker growth in October and a second lockdown from November.

Our expectations for the fourth quarter and beyond will depend on the stringency and duration of ongoing lockdowns; local and national ."

OUT NOW Our latest #NIESRGDP Tracker suggests GDP to contract by 2.2% in Q4 and accordingly, our forecast for 2020 stand at -11.3% with more downside risks on the horizon...

Read here in full:
#economicrecovery #covideconomics https://t.co/k8ROhgICUW

1.23pm GMT

Back in the markets, European stocks are dipping deeper into the red, as this week's vaccine enthusiasm fades a little.

The FTSE 100 index of blue-chip shares in London is down almost 1%, with engineering firm Rolls-Royce (-7.7%) and airline group IAG (-4%) in the top fallers.

The worsening virus situation in many hotspots is weighing on market sentiment as it sparks fears of tougher containment measures that could bring further economic damage.

While a bearish correction after the rally over the past few days would be logical and even healthy, fears of a W-shaped recovery are occupying more and more space in investors minds.

Equities have moved lower this morning, as the vaccine bounce begins to fade across markets. After days of gains the rally in equities is beginning to slow down, as indices throughout Europe move into the red.

As enthusiasm about a vaccine begins to fade the FTSE 100 has lost ground, with a slowdown in the excited buying of hard-hit value names in sectors like travel, airlines, banks and others.

12.51pm GMT

Luke Bartholomew, senior economist at Aberdeen Standard Investments, predict that the UK economy will remain weak until the spring:

While it is welcome news that the economy recovered so quickly over the summer, it is also, in economic terms, very old news. The economy is once again contracting as renewed lockdowns send us into a double dip.

We are unlikely to see a sustainable recovery until spring next year, by which time vaccine roll out should allow for systematic scaling back of lockdown. But what today's data reminds us is that when that recovery does come, its first few months will probably be very rapid."

12.21pm GMT

More experts are predicting that the UK faces a rough winter, with the latest lockdown restrictions following fading growth in September.

Craig Erlam, senior market analyst at OANDA Europe, warns that the economy is struggling again:

UK GDP fell a little short of expectations this morning, rebounding 15.5% following the 19.8% contraction in Q2, leaving the economy 8.6% smaller than it was in January. On the face of it, this may still look encouraging, 8.6% is a lot but that's a really impressive bounceback.

But then, the signs are already there that the economy started to struggle again in October and November and now we're back in national lockdown. It's going to continue to be a stuttered recovery until a vaccine is widely available and the next couple of months is going to be extremely challenging in managing the virus. And at a critical time of year for so many businesses.

While the latest ONS GDP figures offer a glimmer of hope, businesses need to remain realistic about the outlook. The first lockdown in the UK resulted in significant economic impact and, with a second national lockdown in place, Dun & Bradstreet's country risk outlook for the UK has shifted to deteriorating' - while the overall rating remains on an all-time low.

National and local lockdowns put immense strain on every sector, but one that faces tremendous difficulty, and is a particular cause for concern, is the eating and drinking sector where there's been a significant 54% quarter-on-quarter increase in corporate liquidations in Q3 2020. And although there's optimism around a possible mass rollout of a COVID-19 vaccine that will lead to an economic recovery - with stocks lifting in London again - late payments and liquidations remain on the rise.

12.02pm GMT

Here's a video clip of Rishi Sunak commenting on today's GDP figures.

11.40am GMT

Discount retailer B&M is paying its shareholders a 250m special dividend, after a boost in sales during lockdown almost doubled profits in the first half of the year.

11.21am GMT

The International Energy Agency (IEA) has cautioned against hopes that Covid-19 vaccines will give economic demand an immediate boost.

In its latest report, released this morning, the IEA warns that vaccines are unlikely to significantly increase demand for oil until well into next year.

It is far too early to know how and when vaccines will allow normal life to resume. For now, our forecasts do not anticipate a significant impact in the first half of 2021.

Global oil demand unlikely to get vaccine boost until later in 2021, says IEA https://t.co/Xo3neWzcJp

11.03am GMT

Stock markets are a little lower today too, after some remarkable gains earlier this week.

After rising for eight days in a row, the UK's FTSE 100 is currently down 23 points or 0.37% at 6358 points (down from last night's five-month high). Airline group IAG, banks and oil companies BP and Royal Dutch Shell are among the fallers.

Stocks in Europe have handed back some of the monster gains that were made in the previous three sessions. During the week, the optimism surrounding the possible Covid-19 vaccine story ramped up equity markets, and now things have calmed down.

Dealers are starting to realise that even though a drug has a very high success rate in late stage trials, the process of obtaining approval and getting it rolled out, could take a long time.

10.50am GMT

In the financial markets, the pound has lost some ground this morning.

Sterling has dropped by 0.5% against the euro, to 1.116, having hit a six-month high yesterday. It's also down 0.25% against the US dollar, at $1.319.

Despite the headline indicating record growth in the third quarter, the reading is actually a mild disappointment, with the number missing market consensus.

The weaker than expected print will put the brakes on the recent sterling rally and will provide a reality check for the market and will highlight lingering headwinds for the pound in the form of ongoing Brexit negotiations and the growing economic impact of the pandemic"

10.34am GMT

You can read the full details of the UK's record growth in Q3 here:

10.25am GMT

My colleague Phillip Inman writes that the economy would have performed better in September if ministers had acted differently:

If only the government had signalled in July it would keep the furlough scheme in place until next March, as it was subsequently forced to do.

If only the gaps in the first wave of the chancellor's rescue schemes, which left millions of people without a coronavirus safety net, had been filled.

10.22am GMT

10.21am GMT

Chancellor Rishi Sunak has been interviewed about today's GDP figures on Sky News, and suggested that he would consider a range" of measures to support the economy next year.

Q: What will the economic impact of the second lockdown be?

We know that the economic damage is significant, we know that three quarters of a million people have already lost their jobs since the start of this crisis.

That's why we've put in place a series of measures to try and mitigate as much of that damage as possible - extending the furlough scheme, creating job placements for young people through the Kick Start scheme, providing support to those who are most vulnerable, and it's important we keep doing that.

I firmly believe that's the right thing to do, to use localised intervention. And that was an approach was supported by our scientific and medical advisors and we were all watching the spread of the disease.

We'll have to look at the economic situation then and see what's the best form of our support.

We want to make sure that we get the economy going strongly coming out of this. We want to make sure we support employment, support people going in to jobs.

NEW: @rishisunak tells me he's already considering new measures to kickstart the economy next year:
We want to get the economy going strongly coming out of this... to get consumers spending again. So we'll look at a range of things to see what the right interventions are."

9.23am GMT

Worryingly, this morning's GDP report shows that UK business investment remains very weak, despite the return to growth (for the moment...)

Business investment is still 20.5% below its level at the end of 2019, lagging behind household consumption (which is now 12.4% below its Q4 2019 level).

As this is a calendar quarter, we have have the expenditure measure of GDP. Household consumption bounced back in Q3 following a big fall in Q2. On the other hand, there was only a small pick-up in business investment, which remains well below its pre-pandemic levels. (9/n) pic.twitter.com/7OguYoSKPX

There is the risk - especially given heightened uncertainties stemming from the renewed rise in COVID-19 cases - that companies remain cautious for an extended period in new investments with negative implications for productivity.

Uncertainties over the UK-EU's future trading relationship are also currently likely to be weighing on investment.

9.10am GMT

Jonathan Athow, deputy national statistician for economic statistics at the ONS, points out that trade in the hospitality sector slowed in September, due to the Eat Out to Help Out scheme ending. Schools and universities, though, added to GDP.

Athow says:

The return of children to school boosted activity in the education sector. Housebuilding also continued to recover, while business strengthened for lawyers and accountants after a poor August.

However, pubs and restaurants saw less business after the Eat Out to Help Out scheme ended and accommodation saw less business after a successful summer."

8.51am GMT

Our economics editor Larry Elliott writes that the recovery has petered out in September:

Britain's economy grew at a record quarterly rate of more than 15% as lockdown restrictions were eased in the summer but the recovery has now petered out, the latest official figures have revealed.

Data from the Office for National Statistics showed that national output expanded by just 1.1% in September - the last month before curbs on activity to cope with Covid-19 were re-introduced.

8.46am GMT

Economist James Smith of Resolution Foundation has written a handy thread on today's UK GDP figures - outlining how the economic situation is still bad, and likely to get worse this quarter:

.@ONS monthly GDP out this morning for September.

Massive record for Q3 at 15.5% - 3 times faster than the pre-pandemic record for a quarter (1973).

BUT Sep growth slowed again, and worse is to come...

...a short thread on this morning's data to follow.

The 3m-on-3m growth rate for September (i.e. for Q3 as a whole) is comfortably an all-time high at 15.5%.

(Is very clear we are not going back to drawing GDP growth charts again...) pic.twitter.com/UP5luj78uy

Monthly data for September were much more disappointing, however.

Monthly growth slowed again to 1.1%. pic.twitter.com/XMe5i1EwfP

The rate of growth slowed sharply again in September.

GDP is still tracking above the OBR's central scenario - published in July - but looks set to fall back below.

The dot here takes shutdown sectors back to May. On that basis, now expect Q4 to be roughly a 2% contraction. pic.twitter.com/8GQIV9tWsb

This chart shows how the sectors have fared relative to February. Despite a strong bounce back, many sectors are still operating way below normal levels in September. pic.twitter.com/9BsX3TWBht

Hospitality output has registered some massive gains in recent months - growing nearly 70% in August as the Government's Eat Out to Help Out scheme boosted demand.

But in Sep it hit a wall and fell 8.3%. The outlook for Q4 is obviously much worse. pic.twitter.com/3WXjuBz2Qz

8.26am GMT

Several experts are warning that the UK economy will shrink again in the current quarter, given the slowdown in September and the tighter Covid-19 restrictions imposed since then.

Alistair McQueen, Head of Savings and Retirement at Aviva, says recessionary fears' are swirling, following the news that GDP only expanded by 1.1% in September.

This latest data reveals that the UK's economic recovery is slowing.

The recovery in Q3 output levels was expected after the depths of the spring lockdown and the boost to consumer spending triggered by the Eat Out to Help Out scheme. However, September's data points to a slowdown in the country's economic revival.

We already know that GDP will struggle to rise in October as tighter restrictions were imposed and that it will take a hammering in November as the effects of the second COVID-19 lockdown are felt.

We have pencilled in a hit of 8.0% m/m in November. That would result in a 3.5% contraction in Q4. But the recent news of a potentially effective vaccine means that the outlook beyond the next six months could be much rosier than we have previously anticipated.

There were already signs of trouble emerging in the monthly data for September, before many of the recent restrictions came into force.

The overall growth figure for September (1.1%) was weaker than anticipated, reflecting a lower boost from education than we'd expected (when schools and universities returned properly for the first time since before lockdown)."

Growth in the quarter started brightly, boosted by the easing of lockdown restrictions and the Eat Out to Help Out scheme in August, but it waned in September.

With lockdown restrictions back in place, Q4 is likely to weaken further, however, thanks to the recent positive Pfizer vaccine news, we can potentially start looking forward to GDP growth in 2021 with more confidence."

8.09am GMT

Labour's shadow chancellor, Anneliese Dodds, says it's a relief to see the UK economy returning to growth in the last quarter (growing by 15.5%).

Speaking on Sky News, Dodds points out that the economy is still much smaller than before the crisis - 9.7% smaller compared to Q4 2019. And she fears the recovery could stumble during the current quarter:

There are concerns that we could be seeing a shift backwards because of the lockdown that it currently underway.

This really shows that the government has got to get a grip of those issues that are driving economic decline, particularly the public health crisis and get test, trace and isolate sorted out.

7.56am GMT

Chancellor of the Exchequer, Rishi Sunak, has warned that there are still hard times' ahead, with growth likely to have kept slowing since September.

Responding to the GDP figures, he says:

Today's figures show that our economy was recovering over the Summer, but started to slow going into Autumn. The steps we've had to take since to halt the spread of the virus mean growth has likely slowed further since then.

But there are reasons to be cautiously optimistic on the health side - including promising news on tests and vaccines. My economic priority continues to be jobs - that's why we extended furlough through to March and I welcome the news today that nearly 20,000 new roles for young people have been created through our Kickstart scheme.

7.46am GMT

The Office for National Statistics also points out that the UK has suffered a much steeper Covid-19 slump this year than the US, and other major European economies.

It says:

The UK economy is still 9.7% lower in Quarter 3 2020 compared with the end of 2019.

This is more than twice as large as the cumulative drop in GDP observed in Italy, Germany and France and nearly three times the size of the cumulative drop of 3.5% in the US.

7.39am GMT

All three main sectors of the UK economy expanded in the July-September quarter, today's report shows.

Services output grew by 14.2% in Quarter 3 2020, while production output increased by 14.3%, and construction output expanded by a pacey 41.7%.

It is important to note that since the peak monthly growth in June, growth in GDP and its main sectors has slowed.

7.23am GMT

Here's another chart, showing how the UK's record-breaking growth in July-September still leaves the economy much smaller than in January.

7.19am GMT

This chart of monthly GDP shows the slowdown of growth in August and September as momentum eased through the quarter.

7.11am GMT

The UK economy did slow in September, though, and by more than forecast.

The ONS reports that UK GDP grew by 1.1% in September 2020, below the 1.5% which City economists had expected.

September 2020 GDP is now 22.9% higher than its April 2020 low. However, it remains 8.2% below the levels seen in February 2020, before the full impact of the coronavirus (COVID-19) pandemic.

7.04am GMT

Newsflash: UK GDP grew by 15.5% in the third quarter of this year, a record pace, as the economy recovered from the economic shock of its first lockdown.

But that still leaves the economy around 9.7% smaller than at the start of the year, before the pandemic.

#Breaking Britain's economy expanded by 15.5% between July and September as it rebounded out of the recession caused by the spring coronavirus lockdown, the Office for National Statistics has said

6.53am GMT

Michael Hewson of CMC Markets says today's GDP figures will show how much momentum the UK economy carried into its current lockdown:

With the increase in restrictions seen through October, and the partial lockdown of the economy into November, the damage seen in Q4 is likely to eat into the recovery seen in Q3, which means the numbers today are likely to be seen through the prism of being in the rear-view mirror, and somewhat old news.

That doesn't mean the numbers should be considered meaningless. A good number will still be welcome, with the hope that the rebound is strong enough as to mitigate some of the economic losses we are set to see in the next couple of months, as new lockdown measures bite into Q4 economic activity.

6.50am GMT

Analysts at RBC Capital Markets predict that the UK's economic momentum waned' towards the end of the quarter:

Given the weaker than anticipated monthly GDP growth for August of 2.1% m/m, our economists now expect GDP to have expanded by 15% q/q, down from 19% q/q previously.

In addition, more than half of the growth in GDP in August came from the accommodation and food sectors, which benefited from a combination of staycations and the government's Eat Out to Help Out scheme. That contribution is unlikely to have been repeated in September though the monthly figure should benefit from the reopening of schools, and we look for a monthly expansion of 0.8% m/m, which would leave GDP 8.6% below its pre-pandemic level at the end of the quarter.

6.33am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

All eyes are on the Office for National Statistics this morning, as it reveals how rapidly the UK recovered over the summer, and how the economy fared in September as the second wave of Covid-19 cases began.

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/