Economic Perspectives –

Disappointing GDP data in July, as the recovery slows

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


13th September 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK data:

  • GDP rose a disappointing 0.1% (MOM) in July and was still 2.1% lower than in pre-pandemic February 2020.
  • Services were flat in July, whilst production rose, bolstered by a recovery in oil field production. Construction output fell for the fourth consecutive month.
  • There was a modest deterioration in the trade balance in July. Exports to the EU fell by 6.5% (MOM), whilst exports to the non-EU rose by 5.0%.   
  • Markit indicators suggested continuing growth in August, though growth slowed for services and construction compared with July. Manufacturing was little changed. The surveys noted continued business concerns about staff and supply shortages and inflationary pressures. However, all three sectors remained optimistic about prospects.
  • The SMMT reported weak new car registrations in August.
  • The Halifax reported house prices rose by 0.7% (MOM) in August, to be 7.1% higher YOY.
  • The HMRC reported that the number of employments (sic) on furlough was 1.56mn on 31 July 2021, some 340,000 lower (MOM) than on 30 June. The number had peaked at 8.9mn on 8 May 2020. The furlough scheme is due to end on 30 September 2021.
  • In giving evidence to the Treasury Select Committee, the Bank Governor said the end of the furlough scheme should help with current worries about “getting jobs filled” but added that, while other pressures on the economy caused by supply chain bottlenecks and higher commodity prices looked likely to fade, he had a “bit more concern about persistence in the labour market story”. On the economy generally he noted that “…at the moment we are seeing some levelling off in the recovery.”

Other UK news:

  • The Chancellor launched the Spending Review 2021 on 7 September, which will set budgets for FY2022-FY2024. The Review will be released on 27 October, the same day as the Budget.
  • The PM announced the Plan for Health and Social Care on 7 September, in which around £12bn a year of additional taxation will be raised to provide extra resources for health and social care. Around £1.8bn a year will be allocated to social care.
  • A UK-wide 1.25% Health and Social Care Levy based on National Insurance contributions (NICs) will be introduced. The Levy will be effectively introduced from April 2022 (FY2022), when NICs for working age employees, self-employed and employers will increase by 1.25%. From April 2023 (FY2023), the 1.25% Levy will be formally separated out and will also apply to individuals working above State Pension age, and NICs rates will return to their FY2021 levels. The rates of dividend tax will also be increased by 1.25% from April 2022.

International update:

  • The ECB moderately slowed the pace of net asset purchases under the pandemic emergency purchase programme (PEPP) at its September meeting. Policy was otherwise left unchanged.
  • The ECB upgraded its GDP forecasts in September compared with June and raised its inflation forecasts. Higher inflation was assessed to be driven by “temporary upward factors”.

Ruth Lea said “The increase in July’s GDP was disappointing. However, the “pingdemic”, with associated staff absences, operated throughout the month, with the relaxation of the self-isolation requirements of those contacted by Test and Trace only lifted on 16 August. Growth should, therefore, improve in August and recovery should be sustained. But it is clear that growth has slowed significantly since earlier in the year. Granted the Markit surveys suggested some overall slowing in August compared with July, but this does not invalidate Markit’s findings, or indeed the ONS’s data, as there are timing and coverage differences”.  





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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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