The UK economy is improving. Signs of improvement, despite the challenges of the third lockdown, grew slightly in February. The pandemic continued to take its toll. But if the trend continues we can start to feel confident that we are finally moving beyond the worst of the pandemic’s short-term economic effects. The pandemic continued to take its toll.
The Office of National Statistics (ONS). (Who are responsible for collecting and reporting the data) Announced that the economy grew by 0.4% in February. This figure should, as always with such statistics, be treated with caution. As more data become available and more in-depth analysis is possible the figures can, and often do, change.
However, the direction of travel is positive. After the economic shocks of 2020 it should be regarded as good news. Indeed, even the 2.2% fall in GDP reported in January was an improvement on the predicted 2.9% fall.
What contributed to the growth?
What was clear is that some sectors of the economy are doing better than others. The manufacturing and construction sectors drove much of the growth, with GDP of 1.3% and 1.6% respectively. This reflects the effects of the lockdown restrictions. Which allowed those sectors to largely continue operating which other sectors were all but shut down.
The services sector, which has been hard hit by the pandemic, saw only 0.2% growth. But, because services comprise about 80% of the UK economy, this formed a large part of the overall figure, pulling down the more impressive construction figures.
What about retail?
Although the small growth in services is of concern because it is such a big part of the economy, there is still some positive news there. Of the fourteen sectors that form part of the services GDP, ten grew, with the biggest growth in retail.
There is some cause for optimism from this. Non-essential retail was closed during February. So continued growth, especially in the difficult post-Christmas and sales period, is a welcome sign. Although overall spending remains below pandemic levels, the growth is an indicator that consumer confidence is returning and, as the economy re-opens, we might expect healthy levels of spending. However, a large proportion of that spending was online. It remains to be seen how much shoppers will return to traditional retail when that becomes an option again.
The impact of Brexit might be improving
The economy is a complex system, and it’s impossible to be precise about the effects things like the pandemic and Brexit are having. However, it appears that the impact of Brexit might be lessening too. Exports to Europe slumped by a record £5.7 billion in January, however, they have rebounded at least part of the way back, recovering £3.7 billion of that in February.
Still a long way to go
Following the record contraction of the economy during the pandemic in 2020 the nation is in a much better economic state than it was. However, there is still some distance to go, the ONS reported that, despite better-than-expected figures and the recent growth, the economy is still 7.8% smaller than it was a year ago. However, it looks like there are grounds for cautious optimism for 2021 and beyond. But there we have it. The UK economy is improving.
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