GDP Q3 2021 Preliminary Estimate

UK GDP rose by 1.3% in Q3 2021 and is now 2.1% below its pre-pandemic level

Source: ONS

Headlines:

UK GDP is estimated to have increased by 1.3% in Q3 2021 (July-Sept). This represents a marked slowdown on the 5.5% increase seen in Q2.
The level of economic activity in the UK remains 2.1% below where it was prior to the pandemic at the end of 2019.
On a monthly basis, GDP fell in July (-0.2%), before picking up again in August (+0.2%) and September (+0.6%).
Hospitality, arts and recreation and health were the key growth drivers over the quarter following the further easing of restrictions and reopening of the economy.

GDP breakdown by sector

Services

The services sector remains the main contributor to the economic recovery, expanding by 1.6% in Q3, following on from strong 6.5% growth in Q2.
Services output has almost fully recovered and is now only 0.7% below Q4 2019’s pre-crisis level (or 0.3% below Feb 2020).
Accommodation and food services surged by 30.0% in Q3, while arts, entertainment and recreation services rose by 19.6%, reflecting the relaxation of almost all Covid-19 restrictions in July, including the re-opening of indoor hospitality.
However, wholesale and retail output fell by 2.5% in Q3, as the initial retail boom phased out and consumers prioritised spending in other areas such as hospitality. Retail sales fell month-on-month in July (-2.9%), August (-0.6%) and September (-0.2%).
The hospitality industry is now further above its pre-crisis level of February 2020 than retail, indicating a rapid rebalancing in consumer spending away from goods towards newly reopened services, a reflection of staycations and strong pent-up demand for socialising.
In September, supply chain disruption and fuel shortages also dragged on wholesale and retail trade (-1.5%), with the new car market recording its weakest September sales since 1998.

Production

Production output rose by 0.8% in Q3 and is now 2.1% below its pre-pandemic levels.
The largest contribution to the quarterly increase was from mining and quarrying, with output rising by 26.3% following three consecutive quarters of contraction. The increase can be attributed to the reopening of sites that had previously been temporarily closed for planned maintenance.
Manufacturing output fell by 0.3% in Q3, driven by a sharp decline in the production of motor vehicles (-8.2%) caused partly by a global microchip shortage.

Construction

The Construction sector fell by 1.5% in Q3, after four consecutive quarters of growth.
All sub-sectors of construction declined, reflecting challenges faced by the construction industry from rising cost of raw materials and delays to the availability of products.
Construction output had recently recovered to be 0.9% above its pre-pandemic level in April 2021, but in September 2021 is now 1.0% below its pre-crisis level.

Household consumption

In Q3, household consumption increased by 2.0%, reflecting the continued easing of COVID-19 restrictions.
In comparison with levels before the pandemic, household consumption is now 4.4% lower than in Q4 2019.
The largest contributions were from spending on restaurants and hotels (+30.9%) and transport (+4.5%), which was partly offset by household goods and services (-9.6%), and clothing and footwear (-7.7%).