GDP Q4 2020 First Estimate

Headlines:

Annual GDP fell by 9.9% in 2020, the largest yearly decline on record. The widespread economic impact caused by COVID-19 is reflected in the fact that all four sub-sectors saw sharp declines in output: services fell by 8.9%, production fell by 8.6%, construction fell by 12.5% and agriculture fell by 9.4%.
GDP grew by 1.0% in Q4 2020 (Oct-Dec), following on from the record 16.1% growth recorded in Q3. Despite two consecutive quarters of growth, UK GDP remains 6.6% below where it was in Q4 2019, prior to the pandemic.
On a monthly basis, GDP increased by 1.2% in December, above market expectations of 1.0%. This follows a revised 2.3% decline in November, as a second national lockdown weighed on economic activity.
During December, a period of eased restrictions early in the month was followed by tighter restrictions across all UK regions over the second half of the month.
December’s growth means the UK is likely to avoid a double-dip recession (two recessions within a short period of time).

GDP growth in 2020 fell by 9.9%, returning close to 2013 levels

Source: ONS

GDP breakdown by sector

In Q4 2020, the services sector saw the weakest growth (+0.6%) due to the comparatively higher restrictions on consumer facing industries that were in place in November. Meanwhile, Construction rose by 4.6% and Production by 1.8% in the final quarter.
Within the services sector, accommodation and food services fell by 32.8% in Q4 2020, due to the reintroduction of restrictions in most parts of the UK in November 2020.
The services sector saw a partial recovery in December and acted as the main contributor to GDP growth over the month, increasing by 1.7% on November. The services sector is now 6.9% below the level of February 2020.
Service industries in December benefited as restrictions were eased at the start of the month. The re-opening of non-essential retail and food service activities boosted consumer demand for pubs and restaurants, motor vehicles and personal services such as hairdressers. The Health sub-component also grew strongly in December (+2.4%), mainly due to increased activity from coronavirus testing and tracing schemes across the UK.
The Production sector grew marginally by 0.2% in December 2020, while the Construction sector acted as a drag on growth, falling by 2.9% in December following seven consecutive monthly increases.

Source: ONS