FILE PHOTO: The City of London financial district can be seen in the background as people sit at an outdoor dining area during sunny weather on the south side of the River Thames in London, Britain, September 7, 2021. REUTERS/Henry Nicholls
October 13, 2021
By David Milliken
LONDON (Reuters) -Britain’s economy returned to growth in August after contracting for the first time in six months in July, keeping intact financial market bets that the Bank of England will begin raising interest rates before the end of the year.
Gross domestic product grew by 0.4% in August – a shade under market expectations in a Reuters poll of economists – after it was revised down to show a drop of 0.1% in July when staff absences linked to the Delta variant of COVID-19 peaked.
“The economy picked up in August as bars, restaurants and festivals benefited from the first full month without COVID-19 restrictions in England,” Darren Morgan, director of economic statistics at the Office for National Statistics, said.
Financial markets were little changed after the data.
The BoE looks on course to be the first major central bank to raise interest rates since the start of the pandemic. Financial markets are betting on a rise to 0.25% by December, up from its current all-time low of 0.1%.
After the latest official data, Britain’s economy is now within 0.8% of its pre-pandemic size — a much smaller gap than when the last monthly data was released thanks to upward revisions to output growth earlier in the year.
Britain’s economy shrank by 9.7% in 2020, its joint-biggest drop in 300 years and matching the annual decline in 1921, when the economy was still reeling from the cost of World War One.
The International Monetary Fund forecast on Tuesday that Britain was on track to have the fastest expansion of any country in the G7 group of rich nations, growing by 6.8% this year, although the outsize scale of last year’s slump means it will still take longer to recover than most of its peers.
Britain’s economy expanded rapidly in the first half of this year, when the fast initial roll-out of COVID-19 vaccines allowed lockdown restrictions to ease.
But this has slowed since mid-year due to a wave of cases of the Delta variant and global supply chain difficulties, which have been exacerbated by new post-Brexit restrictions on trade and immigration.
Growth in the three months to August slowed to its weakest since April at 2.9%.
(Reporting by David Milliken Editing by William Schomberg)
Source: One America News Network
