"The speed and the scale of the UK’s recovery has surprised to the upside, persistently and significantly, for at least the past four months.”So said the Bank of England’s chief economist, Andy Haldane, last week. That assessment hasn’t aged well.The UK economy grew by 2.1% in August, less than analysts expected and much less than the growth the Office for National Statistics (ONS) recorded in July (6.4%) and June (9.1%).What is striking is that the headline number was powered by just a few industries.The ONS estimates that more than half of the growth in August came from businesses in “hospitality”.
Pubs, bar and restaurants were making hay in the August sunshine, serving up 100 million meals under the chancellor’s Eat Out to Help Out Scheme.
Hotels were scrambling to accommodate holiday-makers who has decided to stay in the UK rather than risk travelling abroad.
Those same businesses now find themselves at sixes and sevens again as restrictions are being reimposed.Strip out the other bright spots in the growth figures (output across the NHS, education and house-building) and the big picture is clear: the broader recovery in August was weak.
“Today’s figures show our economy has grown for four consecutive months,” the chancellor Rishi Sunak points out.He is right, of course. But, what’s concerning here is that the recovery looks to have lost steam faster than Haldane and others believed.As of the end of August, output was still 9.2% below its pre-crisis level in February. There’s an awful lot of clear blue sea that still needs to be made up and the wind has just gone out of the sails.
There are causes for celebration, of course. Consumer spending has recovered to pre-crisis levels and the Job Retention Scheme has been enormously successful at keeping people in jobs, if not in work.Delivery companies, car showrooms, estate agents, food, clothing, alcohol and medicine manufacturers are doing roaring trade.But airlines, travel agents, cinemas, rail, bus and coach operators have had a ruinous six months with more to come.In his speech last week, Andy Haldane criticised “catastophising” in the media and cautioned against “pessimism,” which he argued “can be as contagious as the disease - and as damaging to our economic fortunes".Fair enough, but the data suggests the recovery was less sunny than he set out and the immediate position of the economy looks precarious.
Six months after the first lockdown began, every sector of the economy remains well below its pre-crisis peak.The infection rate is high and rising, local lockdowns are being reintroduced, government support is being wound back, unemployment Is expected to rise sharply in the coming months.“There’s no V-shaped recovery here,” concludes Pantheon Macro.