U.K. economic activity rises above expectations in June
The U.K. economic activity’s level picked up in June, growing 8.7 percent sequentially. This provides further evidence that the U.K. economy is on the road to recovery. This follows an upwardly-revised rise of 2.4 percent in May.
Delving into details, rises were seen throughout all three wide sectors of the economy in June with output in both the industrial and construction sectors recording above expected rise of 9.3 percent and 23.5 percent, respectively. Nevertheless, as in May, a smaller recovery in the largest part of the U.K. economy, the service sector was noted, recording a growing of 7.7 percent.
Expectations were for the output to post a slower rebound in June, compared to the other sectors given that it would have still been more-acutely impacted by lockdown restrictions. Nevertheless, with, pubs and restaurants opening up last month, services are expected to show a much stronger performance from July, noted Lloyds Bank in a research report.
With social distancing rules eased further last month, a number of signs indicate towards the U.K. economy making a solid beginning to the third quarter, with business activity surveys and fast indicators pointing to stronger trends. This should imply that the recession seen in the first half of 2020 almost certainly proves short lived.
The Bank of England’s latest forecasts envisage the level of GDP coming back up its pre-crisis level towards the end of next year.
“While this would be a relatively quick rebound compared to other downturn episodes, given the scale of the challenge facing the recovery, it is likely that both the Bank of England and UK government are likely to remain highly sensitive to any signs of faltering in the recovery. As such, the likelihood of further stimulus measures being deployed remains high, especially with the outlook challenged by a number of risks – including those stemming from the labour market (as the furlough scheme is wound down) and those associated with a further pick up in Covid-19 cases”, added Lloyds Bank.