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PwC comments on ONS September GDP figures

11 Nov 2021

Jonathan Gillham, Chief Economist at PwC UK says,

"Figures published by the ONS today suggest that GDP growth was sticky in the third quarter of 2021. Previously published data for July and August has been revised downwards and the economy grew by 0.6% in September. The economy is thought to be 0.6% below its pre-pandemic level in September, in August it was thought to be 0.8% below. 

"The data published today presents a stark picture of the uneven nature of the recovery. Many of the sectors that are doing well are those that are directly or indirectly benefiting from government support or are rebounding from the end of lockdown restrictions. For instance, third quarter growth has largely been driven by the reopening of previously 'locked down' sectors such as arts and entertainment, accommodation and leisure. There has also been the return of face to face GP appointments, which has boosted economic activity linked to healthcare, and a rush in the legal profession to complete housing transactions before the end of the stamp duty holiday. Construction output benefited from government stimulus spending, but is still suffering from supply chain shortages and fell by 1.5% in the third quarter. 

"Car sales and manufacturing are still being hit by ongoing semiconductor shortages - new car sales presented the lowest September figures since 1988. The retail sector is still struggling and many consumer facing workers in this sector are experiencing real wage declines as opposed to online retail workers who are benefiting from higher wages. Oil and gas extraction is also experiencing a slow recovery with output 17.6% lower than it was 2 years ago. 

"The OBR published forecasts in the October Budget that suggested 1.6% growth in the third quarter, but today's published data is below that at 1.3%. The OBR downgraded their forecast for Q4 from 3.3% to 1.9% - mostly due to stronger than expected performance in the first half of the year. The rationale for this being that the bulk of the recovery to pre-pandemic levels had taken place earlier than anticipated so there was less of a rebound effect in the second half of the year.

"Today’s data suggests that growth in the fourth quarter may not live up to the Chancellor’s expectations given the polarisation we are seeing in the recovery." 

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